BIP Is No Mere Blip

Short-term traders sprint like hares, often hopping between speculative hunches and under-researched bandwagons. Fools, on the other hand, are content to sit on the tortoise's shell, armed with a mantra as relevant today as it is during bull markets: slow and steady wins the race.

In a market environment like this, tortoises are admittedly no less susceptible to short-term setbacks than their hippity-hoppity counterparts, and long-term investment specialist Brookfield Asset Management (NYSE: BAM  ) has not been immune to the turmoil. Seeking a balanced portfolio of infrastructure assets, including utilities, transportation, and timber operations, BAM spinoff Brookfield Infrastructure Partners (NYSE: BIP  ) is looking to win the race for stable income and capital appreciation.

Brookfield Infrastructure posted adjusted operating cash flow of $13.1 million for the third quarter, representing a 25% decrease from the prior year. Net income reversed course from a $5.3 million gain in 2007 to a $1.4 million loss for the latest quarter. Despite solid returns from the company's Chilean electric transmission lines, thanks to a retroactive rate hike and favorable currency exchange rates, the third quarter was broadsided by severe weakness from the timberlands segment.

Brookfield offered a decidedly negative outlook for the timber industry -- echoed by recent results from Weyerhaeuser (NYSE: WY  ) and Louisiana-Pacific (NYSE: LPX  ) -- and is adapting by conserving its inventory of secondary-growth Douglas fir until returns are more favorable. Meanwhile, BIP perceives an historic opportunity to acquire additional assets at distressed valuations, thanks to the panic of 2008.

BIP will divest a minority stake in non-core transmission line assets in Brazil for anticipated proceeds of $270 million. Combined with a sizable credit facility, the company now expects to have $600 million in its coffers with which to capitalize on the bargains available to grow its asset portfolio. For starters, Brookfield Infrastructure will invest $103 million to maintain a 30% interest in Longview Timber Holdings, as that company issues shares to purchase nearly 68,000 acres of timberland in Washington.

With a 7% dividend yield exceeding those of even REIT-structured timberland plays like Rayonier (NYSE: RYN  ) and Plum Creek Timber (NYSE: PCL  ) , Brookfield Infrastructure is not without its rewards. With timberlands looking like a potential long-term drag on earnings, though, I would like to see Brookfield Infrastructure place greater emphasis upon acquiring transportation and utility assets before I re-affix my Foolish seal of approval.

Further Foolishness:

Brookfield Infrastructure Partners L.P. is a Motley Fool Inside Value selection. Brookfield Asset Management is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (18)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2008, at 8:24 AM, Stocklovr wrote:

    "With a 7% dividend yield exceeding those of even REIT-structured timberland plays like Rayonier (NYSE: RYN) and Plum Creek Timber (NYSE: PCL), Brookfield Infrastructure is not without its rewards."

    I copied and pasted the dividend info below from CAPS. How do you come up with a 7% dividend? I must be missing something because CAPS appears to be correct.

    Yield % 0.80

    Annual Dividend 0.11

    -Slvr

  • Report this Comment On November 07, 2008, at 8:46 AM, XMFSinchiruna wrote:

    Stocklovr... that CAPS data is incorrect in this case, and you'll see Yahoo is also reporting the same discrepancy. I verified the dividend directly from the VP of Investor Relations before going to print. The quarterly dividend is $0.265 per unit, for $1.06 annualized... 7%.

    Fool on!

  • Report this Comment On November 07, 2008, at 11:08 AM, Stocklovr wrote:

    Thanks, TMFSinchiruna! I'd looked at this before and you are correct. Yahoo Finance is also wrong!

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