Last year was one of the best in Brookfield Infrastructure Partners' (BIP 2.62%) history. The global infrastructure operator delivered strong organic growth, which it complemented with a steady stream of acquisitions. Those dual fuels gave the company the power to increase its dividend by another 7% this year while also helping it generate a market-crushing total return of 52% in 2019.
The company ended the year by producing solid fourth-quarter results while making excellent progress on its strategic plan, giving it lots of momentum this year.
Digging into Brookfield Infrastructure Partners' fourth-quarter results
|
Metric |
Q2 2019 |
Q2 2018 |
Change (YOY) |
|---|---|---|---|
|
Funds from operations (FFO) |
$358 million |
$326 million |
9.8% |
|
FFO per unit |
$0.86 |
$0.82 |
4.9% |
Data source: Brookfield Infrastructure Partners. YOY = year over year.
Brookfield Infrastructure Partners grew its total FFO by nearly 10% year over year during the fourth quarter. While its per-unit growth was a bit less, that was because it took advantage of its soaring unit price to sell units so that it could further enhance its ability to make acquisitions. Even with that near-term dilution, the company still ended the year right on track with its forecasted annualized run-rate.
Fueling that growth was the strength of its data infrastructure business:
Data source: Brookfield Infrastructure Partners. Chart by author.
FFO in Brookfield's data infrastructure segment soared 110% year over year. Powering that growth was the strength of its legacy French telecommunications business and the acquisition of four data infrastructure operations, which included data storage businesses in the U.S., Brazil, and Australia, and an integrated data distribution company in New Zealand. For the full year, the data infrastructure segment generated $136 million of FFO, up 75% from 2018.
Brookfield's energy segment also produced strong fourth-quarter results as FFO spiked 21%. The business benefited from a combination of organic growth and acquisitions, which included the purchase of a natural gas pipeline in India and strong volume growth at its North American gas pipelines. For the full year, the energy segment generated $412 million of FFO, up 53% from 2018's level, due to those factors and the acquisition of two North American pipelines at the end of 2018.
The utility segment's FFO rose 10% year over year due to the completion of $300 million of capital projects in 2019 and the acquisition of a regulated North American gas transmission business. For the full year, FFO increased slightly to $577 million as an asset sale and foreign exchange headwinds weighed on comparable results.
Brookfield's transportation segment was the lone weak spot during the fourth quarter as FFO slipped less than 1%. Asset sales weighed on earnings during the period as the company completed the divestiture of a 33% stake in its Chilean toll road and European port operations. For the full year, FFO increased by about 2%, driven by 5% organic growth thanks to volume increases and higher tariffs across most of its operations, offset by those two asset sales.
Full-year FFO totaled $1.38 billion, or $3.40 per unit, up 12.4% and 9.3%, respectively. The company delivered a 9% organic increase in FFO, which was at the top end of its targeted growth range.
Image source: Getty Images.
A look at what's ahead for Brookfield Infrastructure Partners
Brookfield recently closed two more large-scale transactions that will boost its first-quarter results. It invested $750 million to acquire an interest in a North American rail business and federally regulated natural gas gathering and processing assets in Western Canada.
In addition to that, the company has recently signed deals to invest in three more data operations. It finalized an agreement to invest $400 million into a portfolio of telecom towers in India that should close during the fourth quarter. It also spent $140 million on the acquisition of 2,000 towers and distributed antenna systems in the U.K. Finally, it signed a deal to acquire Cincinnati Bell (CBB +0.00%). The company would invest $480 million into that transaction, which it hopes to close by the end of the year. While a rival infrastructure fund has since offered a higher price for Cincinnati Bell, the company currently intends to complete its agreed-upon transaction with Brookfield.
Given the company's visible combination of organic and acquired growth, it expects FFO to keep rising at a healthy rate this year. In its view, it will exit 2020 with an annualized FFO run rate of 12% to 15% above the current level, implying that its fourth-quarter FFO will be between $0.96 and $0.99 per unit. That forecast suggests the company will have plenty of fuel to continue growing its dividend at a meaningful rate.
A solid end to an excellent year
Brookfield Infrastructure continues to create value for its investors by actively managing a portfolio of global infrastructure businesses. The company expects more wheeling and dealing this year as it closes acquisitions while also likely selling additional mature assets to help pay for new opportunities. While that activity will likely cause some volatility in its quarterly results, it expects to end the year generating even higher earnings, giving it plenty of fuel to keep paying a growing dividend.
