Why Brookfield Infrastructure Partners L.P. Investors Have Nothing to Worry About
Brookfield Infrastructure Partners (NYSE: BIP) pays its investors very well. The stock dividend currently yields 4.3%, which is double the market's average. Furthermore, the company believes it can increase that payout by 5% to 9% annually over the long term because of the embedded organic growth of its current portfolio of infrastructure assets. While that forecast might seem to be optimistic, the following three factors should melt away any worry investors have in the company's ability to continue paying a growing distribution.
One of the hallmarks of Brookfield Infrastructure Partners is the stability of its cash flow, driven by the fact that contractual obligations and regulated structures underpin 93% of its funds from operations (FFO). The company further solidifies its cash flow by owning a diverse set of 33 businesses. Because of that, no more than 27% of its FFO comes from any one operating group. Meanwhile, 65% of its underlying earnings have no volume risk, which means it can bank on that cash flow even if times get tough. That baseline volume number is worth noting because it roughly matches with the company's payout policy to distribute 60%-70% of annual FFO to investors, which should increase investors' confidence in the long-term sustainability of the payout.
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Source: Fool.com
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