You've worked hard for your money, and now you'd like to protect it. But you'd also like to generate a solid -- and ideally, growing -- stream of income from your investment portfolio, one that can give you the freedom you deserve in retirement.
Fortunately, there are a select few businesses that can help you do just that. Read on to learn about one of the best income investments available in the market today.
Brookfield Infrastructure Partners L.P. (NYSE:BIP) is one of the largest infrastructure companies in the world, with a broad and diverse collection of high-quality assets spanning five continents.
Brookfield operates in four main segments: utilities, transportation, energy, and communications infrastructure -- think electricity distribution lines, toll roads, pipelines, and cell towers.
Importantly, Brookfield's businesses enjoy significant barriers to entry. High replacement costs, regulatory protection, and long-term contracts often help to shield profits from competitors. Brookfield is therefore able to produce reliable cash flow through nearly all manner of business cycles and market environments, which helps reduce risk for investors.
A history of value creation
Moreover, Brookfield excels at capital allocation. It has a strong track record of buying undervalued assets, improving their cash-generating ability, and either harvesting the long-term cash flows they generate or selling them at a sizable profit. In turn, Brookfield has increased its funds from operations (FFO) by 19% annually over the past decade. And, aligned with its target payout ratio of 60% to 70%, it has raised its per unit distribution by 11% annually during this time. Together, this impressive growth has helped Brookfield deliver annualized total returns of 20% over the past 10 years, compared to only 9% for the S&P 500.
Strong growth prospects
Brookfield's goals are to generate long-term returns on equity of 12% to 15% and annual distribution growth of 5% to 9%. The company has identified several key opportunities it believes will help to fuel this growth. In addition to its core markets, Brookfield sees tantalizing growth potential in water, data, and smart cities. Examples include desalination facilities, data centers, and Internet of Things enabled infrastructure. Brookfield estimates that water supply spending alone could reach nearly $7 trillion through 2050, and tens of trillions more dollars in investments are expected to be needed in its other infrastructure markets. Thus, Brookfield should enjoy ample growth in the years -- and decades -- ahead.
An attractive price...and a bountiful yield
After surging more than 30% in 2017, Brookfield's shares have pulled back by about 13% so far in 2018. Shortsighted investors appear to be overreacting to the company's conservative near-term financial forecast. But with $2 billion in organic growth projects slated to come online, Brookfield is well-positioned to deliver on its long-term expansion targets. In addition, the company's proven management team remains on the hunt for more value-creating acquisitions.
Better still, shares now trade for about 12 times FFO and yield 4.8%. That's an attractive valuation and cash distribution yield, particularly from a high-quality business that's set to grow at above-average rates.
Additionally, as a limited partnership and "flow-through" entity, Brookfield Infrastructure Partners L.P. can provide U.S. investors with certain tax benefits (but be sure to check with your tax professional about its suitability in retirement accounts).
All told, with its valuable collection of global infrastructure assets, strong and steady operations, and battle-tested acquisition team, Brookfield has everything it needs to continue to deliver market-beating returns in the coming years. Furthermore, its relatively low-risk profile, discounted share price, and hefty cash distribution yield make it an excellent option for investors in their seventies to consider buying today.