This year has been an outstanding one for Brookfield Infrastructure Partners (BIP -0.08%). The global infrastructure company has grown its cash flow by 10% through the first nine months of the year, highlighted by a nearly 16% acceleration during the third quarter. Driving that growth has been the success of the company's expansion-related initiatives.
The improvement in the company's cash flow has helped fuel a more than 50% rally in its stock price. Add in its 3.8%-yielding dividend, and Brookfield Infrastructure's total return is up to nearly 58% this year.
While its smashing success in 2019 will be tough to repeat, Brookfield expects another good year in 2020. That positive outlook was one of the key takeaways from its third-quarter conference call.
We expect high-end results in 2020
Brookfield Infrastructure's CEO Sam Pollock provided investors with a look at what's ahead on the call. He stated that:
For 2020, and we anticipate our organic growth to be near the top end of our 6% to 9% long-term target range. In addition, we expect that our recently secured investments will be fully contributing to results next year and generating an average going-in FFO yield of approximately 12%, which is highly accretive to our results.
Pollock noted that the company's legacy businesses are on track to grow their cash flow by around 9% next year. That's due to two factors. First, Brookfield is investing in a variety of projects to expand existing operations. Meanwhile, it's also working on several initiatives to improve its profitability.
In addition to that, the company will get a boost from several high-return acquisitions that are in the process of closing. These include a global railroad operator and a portfolio of communications towers in India.
Closing those deals alone will boost the company's annual earnings run rate from $3.50 per share at the end of 2019 up to $3.75 per share by the end of 2020's first quarter, or an additional 7% increase on top of its strong organic growth. That would also put its cash flow 25% above its run rate in June of last year.
Four things to watch in 2020
Brookfield also expects 2020 to be another active year on the strategic front. Pollock noted four things that investors should keep an eye on in the coming months:
First, we're focused on closing the $1.1 billion of recently secured transactions... Second, we're pursuing a robust pipeline of new opportunities, which could lead to another year of outsized investments. Third, we'll continue to execute on the next phase of our capital recycling strategy, with an objective of generating over $1 billion in proceeds from asset sales in 2020. And finally, we're advancing the creation of BIPC to enhance the accessibility of Brookfield Infrastructure to investors.
The company believes it could again be very busy on the mergers and acquisitions front in the upcoming year. Not only is it working to close the $1.1 billion of acquisitions it has already announced, but it also expects to secure more deals in the coming year. Pollock noted that:
We see good opportunities in Asia, in particular, India, [where] there's a banking crisis. And so, people like ourselves who have access to international credit can buy assets there, I think, at [a] good value.
He also said that South America looks appealing, as does the energy sector in North America. Given all those potential opportunities, Brookfield feels confident that it can make several more acquisitions in the coming year.
Meanwhile, the company also expects to continue selling its more mature assets so that it can recycle that capital into higher-returning opportunities. It has already signed a deal to sell five businesses this year, which will bring in more than $1.1 billion in cash. Meanwhile, it has launched several more sales processes that could generate another $1 billion-plus in cash next year, giving it plenty of dry powder to make new acquisitions.
Finally, the company is working to broaden its investor base by creating a publicly traded corporation. That will enable investors to buy shares in their retirement accounts, as well as allow more indexes to include the company among their holdings. This move could make it easier for Brookfield to use its stock to make acquisitions since it could issue these shares to close larger transactions.
Set up for continued success in 2020
Brookfield Infrastructure's financial results are accelerating into 2020 thanks to strong organic growth and the recent and upcoming closings of several acquisitions. Because of that, the company should continue to richly reward its investors in the coming year through another dividend increase and potentially more stock-price appreciation.