A great example of smart income

Greg Dean's picture

We've long talked about how important it is to be selective when looking at income-oriented stocks or mutual funds, given the valuations and where interest rates are today. We are still finding some great opportunities, but it is tougher and they aren't the “plain vanilla” TSX 60 type ideas that many of our peers own.

We wanted to highlight a name that we have owned for some time and have been recently adding to in the income and asset allocation funds.

Brookfield Infrastructure Partners is an $8B market cap “utility-like” stock that recently reported strong results.

Highlights for Brookfield Infrastructure Partners include:

  • Three core platforms: Timber (small), utilities and transportation.
  • They own some of the highest quality/best return profile infrastructure assets globally.
  • It has a 5% dividend yield on a very conservative 60% payout ratio.
  • It is headquartered in Bermuda and thus not eligible to be added to the  S&P/TSX. This ultimately means it’s not on everyone’s radar.
  • It has $1B+ of liquidity in a market where there are a lot of distressed sellers of assets. We believe there is a lot of opportunity to put that money to work at very high returns (12-20%) to generate additional cash flow.

Being part of the Brookfield “network” allows them to source M&A opportunities that are less competitive and offer better returns. We believe they will grow their cash flow and dividend faster than peers and we are paying a multiple of cash flow below peers. It is owned across all of our funds and is a top 10 position in many. The stock has performed well for us and we expect it to continue to do so in the future.

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