Brookfield Infrastructure Partners (NYSE:BIP) could turn out to be the Holy Grail of dividend investments. The company's growth in 2017 is projected at 56%, and right now Brookfield's dividend yield sits at 4.8%. And Brookfield's ultimate goal is 7% per year.
The Big Question is this: can Brookfield attain its goal? To do so, the company needs to meet and/or exceed growth expectations. Analysts forecast that it will. Optimistic analysts put the price target at $51, while more conservative analysts hedge and say $35. The average target price is in the $40 range. These same analysts expect the February 2017 report to announce earnings per share of $0.68.
Brookfield appears to be capable of continued exemplary growth over the next five years. The company recently acquired a 20% interest in Petroleo Brasileiro SA Petrobras' fee-based pipeline for $825 million. The pipeline's capacity is booked to the max, which means immediate profits for Brookfield. The company did not buy a pig in a poke. And Brookfield has secured permission to build greenfield electrical lines in Brazil.
According to Brookfield's 2016 third quarter report, the company dropped $660 million on other acquisitions: toll roads in Peru, natural gas storage facilities in Alberta, Canada, California and Oklahoma, and Asciano Ltd. Asciano operates private railways and ports in Australia. Brookfield already has port operations in Los Angeles and Oakland, Hartlepool and the Port of Tees in the United Kingdom, along with bulk shipping operations in various European ports.
Brookfield is presently negotiating, along with American Tower Corporation (NYSEMKT:ATC) and Bharti Infratel, with India's mobile provider Idea Cellular for 11,000 cell towers. In addition, Brookfield has agreed to purchase 51% of Reliance Infratel from India's Reliance Communications (BATS:RCOM). Moreover, Brookfield is looking to acquire 40% of Bharti Infratel, which is part of Bharti Airtel, the largest mobile provider in India.
The infrastructure moves cited above are not only smart, but poised for growth; growth that will allow Brookfield to provide consistent dividends to investors, along with a strong probability of increasing dividends in coming years. Since 2009, Brookfield's payouts have trended upward, with a 12% CAGR from 2009 to the present.
Brookfield's acquisition of the fee-based pipeline in Brazil in combination with the Brazilian greenfield project will make it possible for the company to increase payouts by 9% in 2017. And Brookfield can put the dividend icing on the cake when the mobile deals in India close.
Three other factors to take away from this brief dissertation on Brookfield are: 1) if the new administration fosters domestic infrastructure growth, Brookfield will benefit; 2) the specter of rising interest rates worries some investors. Even if interest rates rise, the proposed tax write-offs for companies involved in infrastructure projects will offset rising interest rates. And 3) worries of Brazil's populace reacting negatively to foreign investment will be precluded by Brazil's desperate economic situation. In effect, Brookfield is saving the country's bacon, while providing necessary infrastructure.
From a dividend assessment, Brookfield recommends itself to investors looking for long-term payouts. Investors should look for Brookfield's share price to rise to the $40 mark over the next four to six months and, as new projects come to fruition during the latter half of 2017, shares should trade near the $50 mark. When that occurs, the company's payouts will increase.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.