You might have heard about a trick that racecar drivers sometimes use to make their cars go faster. They put nitromethane in the gas tank. The nitro doesn't need outside oxygen to combust. As a result, it generates a lot more power than gasoline. And the racecar goes faster than it normally would -- at least temporarily.
Stock splits can be kind of like nitro. When a highly priced stock splits into multiple lower-priced shares, retail investors sometimes buy heavily. This causes the stock to surge. As with the nitro and the racecar, though, the catalyst doesn't last very long.
But just because the positive effects of a stock split are only temporary doesn't mean that investors should own the stock for a short period. Here's one stock-split stock you can buy and hold for decades.
Image source: Getty Images.
Make it a double
Actually, there are two stocks with upcoming stock splits to buy and hold. However, the stocks share the same underlying business.
Brookfield Infrastructure Partners (BIP 0.56%) was spun off from its parent, Brookfield Asset Management, in 2008. As its name indicates, the company focuses on infrastructure assets. Through the years, it has added a wide range of infrastructure assets to its portfolio, including natural gas pipelines, electricity transmission lines, railroads, ports, toll roads, cell towers, and data centers.
NYSE: BIP
Key Data Points
The company's name also hints that it's organized as a partnership. To be specific, Brookfield Infrastructures is a limited partnership (LP). With LPs, a general partner runs the business. Limited partners can reap the rewards of the business but usually aren't active in operations and have limited personal liability.
This LP structure has its advantages. However, it also can cause hassles for retail investors with tax preparation. Some institutional investors prefer to not own LPs. Some stock indexes also exclude LPs.
Because of these downsides, a new publicly traded entity organized as a corporation -- Brookfield Infrastructure Corporation (BIPC +0.00%) -- was formed in 2019. Again, though, while there are two stocks there's only one underlying business.
NYSE: BIPC
Key Data Points
In May, both Brookfield Infrastructure Partners (BIP) and Brookfield Infrastructure Corporation (BIPC) announced 3-for-2 stock splits. The splits will be conducted on June 10, 2022.
Decades of opportunities ahead
An infrastructure "super-cycle" is underway. The U.S. is embarking on a $1.2 trillion infrastructure overhaul. Swiss Re estimates that around $80 trillion in global infrastructure investment will be required by 2040. Brookfield Infrastructure should have decades of opportunities ahead.
Overall growth in the global economy, especially in developing nations, should drive much of these needs. Brookfield Infrastructure is in all the right places, with assets throughout North America, South America, Europe, and the Asia Pacific region.
The company should have especially strong tailwinds for its data operations, which currently include telecommunications towers and data centers. Global data usage is increasing at a fast pace. The cloud market is growing. And many potentially large markets remain years away from reaching maturity.
Even Brookfield Infrastructure's midstream energy business has room to grow. The company sees natural gas as an essential fuel for the future. Its acquisition of InterPipeline also gives Brookfield Infrastructure significant opportunities in carbon capture.
A nice bonus
Brookfield Infrastructure should be able to deliver solid long-term growth for investors. There's also a nice bonus with its dividend distributions. BIP's dividend yield currently tops 3.5%, while BIPC's dividend yield is a little over 3%. The payouts are the same for both stocks, but the different share prices cause the differences in the yields.
The company expects its distribution will grow between 5% and 9% annually. Since inception, Brookfield Infrastructure's distribution has increased by a compound annual growth rate of arouind 10%.
We'll have to wait and see whether or not the upcoming stock splits cause Brookfield Infrastructure's shares to jump. However, the company's infrastructure opportunities should be more than enough to put this stock in the winner's circle over the next few decades.
