Summer is almost upon us -- and so is an opportunity that growth and income investors won't want to pass up. One of the best buy-and-hold stocks of the last decade is down 15% so far in 2018. The uncharacteristic drop has pushed an already impressive yield to 4.9% and lowered the stock's five-year total return to "only" 88% (compared to a total return of 80% for the S&P 500 in that span).

Why has Wall Street punished the stock? The last time management spoke to investors, it cautioned that leaner times are ahead, but only briefly. That means the business will pad its balance sheet by selling assets generating lower returns in the next several quarters, but only so it can achieve the long-term target of 12% to 15% returns on invested capital. Since that pent-up capital might take time to deploy, the bottom-line growth rate could drag for a few quarters.

While the reaction is typical of Wall Street's hyper-focus on the next quarter or two, long-term investors don't have to be bothered with the same concerns. Rather, they can swoop in and build a position in high-yield units of Brookfield Infrastructure Partners LP (NYSE:BIP) at a steep discount. Here's why it's my top stock to buy in June.

Shipping containers at port.

Image source: Getty Images.

The business

Brookfield's mission statement is pretty simple: "To own and operate a globally diversified portfolio of high quality infrastructure assets that will generate sustainable and growing distributions over the long-term for our unitholders." That includes cell towers and toll roads in India, fiber-optic networks in France, railroads in Australia, and natural gas pipelines in North America, among other assets. 

While Brookfield Infrastructure Partners is actively pruning its portfolio, that doesn't mean it's forgoing capital deployments altogether. Consider several of the long-term opportunities currently receiving investments in each of its four segments:  

  • Transport (43% of assets): Investing in new and expanded toll roads in India and South America, in addition to rail line expansions to accommodate higher traffic in Australia and Brazil.
  • Utilities (31% of assets): Installed 880,000 smart meters for its 3.4 million customers in the Americas and the United Kingdom, which can earn the utilities segment higher rate bases from regulators over time.
  • Energy (19% of assets): Expanding energy pipeline networks to handle increasing production volumes from rising American shale output and to better capitalize on booming oil and gas exports from the United States.
  • Communications (7% of assets): Waiting to roll out fiber-optic connections to 220,000 new customers in France.

The historical focus on slow and steady growth may not be that exciting to investors (widening highways and building pipelines is kind of boring), but it has treated unitholders very well. Brookfield Infrastructure Partners has grown its funds from operations (FFO) -- akin to earnings per share (EPS) -- at a consistently healthy rate. That's important because management aims to pay out 60% to 70% of FFO to unitholders.

The good news is FFO has increased from $682 million in 2013 to $1.17 billion in 2018, while the total payout ratio has averaged 65%. That has allowed the business to grow the distribution at an annual clip of 11% in the last five years. The bad news is management is targeting distribution growth of 5% to 9% per year going forward, and may scrape the lower end of that range due to its ongoing asset reallocations. 

Nonetheless, a remarkable track record of creating value for unitholders indicates management has a great grasp on the markets in which it operates and should provide confidence in the strategy going forward. What opportunities lie ahead?

Looking up at transmission lines and towers against a cloudy blue sky.

Image source: Getty Images.

The outlook

Brookfield Infrastructure Partners has wasted no time offloading lower-performing assets. It recently sold a 28% stake in an electric utility in Chile for $1.1 billion in after-tax proceeds, resulting in a record total liquidity of $4.2 billion at the end of the first quarter of 2018. The business generated $80 million in FFO in 2017, so management will look to deploy the new capital in assets capable of generating more than that in the long term. What might that entail? 

In the near term, there are the organic projects noted above. Additionally, management is working on acquiring a controlling interest in the second-largest natural gas distribution network in Colombia. Brookfield Infrastructure Partners currently owns an 11% stake in the utility, so increasing its equity would help to offset some of the $80 million in annual FFO lost from the Chilean electric utility.

In the longer term, management has outlined four main categories of investment opportunities: data infrastructure, municipal infrastructure, water infrastructure, and geographical expansion into Asia. Cell towers and fiber-optic cable expansions take care of the first group, although the 2017 investor day presentation mentioned a third asset type that would mark new territory for the company's portfolio: data centers. That could hint at Brookfield Infrastructure Partners' strategy to build a vertically integrated "data utility" business in the coming years spanning fiber-optic cables, communication towers, and bulk data processing. 

Meanwhile, the municipal infrastructure category includes over $3 trillion in combined opportunities created by the Internet of Things in everything from smart energy assets to smart homes and security. New opportunities in water infrastructure include desalination facilities and the recycling of used water. And last but not least, the opportunity in Asia covers all of the company's existing segments, with data, transportation, and utilities singled out as high-value shots on goal. 

A roll of $100 bills with a ribbon tied in a bow on it.

Image source: Getty Images.

A gift to long-term investors

In early 2018, Brookfield Infrastructure Partners' management made the decision to bolster the company's liquidity position in order to pounce on more favorable long-term opportunities, even though that will drag on the short-term expansion of the business. Wall Street has punished the stock because of it, but that doesn't change the fact that there are ample opportunities for growth within the existing portfolio and through acquisitions of new asset types.

Simply put, long-term investors can take the recent slide as a golden opportunity to buy a great company at a great price. That's especially true considering it has been one of the best-performing stocks on the market in the last decade, dishing out a total return of 409% compared to 141% for the S&P 500. Growth, value, and a focus on the long term: That's why Brookfield Infrastructure Partners is my top stock to buy in June.