For a high-yield dividend stock, Brookfield Infrastructure (BIPC 1.67%) (BIP 1.56%) has produced a lot of growth over the years. The global infrastructure giant has delivered 15% compound annual growth in its funds from operations (FFO) per share since its formation in 2009.
That helped power 10% compound annual dividend growth, exceptional for a company that pays a high dividend yield. At 3.4%, it's almost double the 1.7% yield of an S&P 500 index fund. That fast growth and lucrative income stream have helped Brookfield deliver market-crushing total returns of 19% annualized since its formation.
This high-powered growth should continue. Brookfield and a partner are acquiring a majority stake in a leading European cell tower operator. That will enhance its ability to capitalize on the growing demand for data infrastructure.
Details on the deal
Brookfield is joining forces with DigitalBridge Group (DBRG 0.49%) to acquire a 51% interest in GD Towers. That entity is the mobile communications tower business of Deutsche Telekom (DTEGY 0.16%). The deal between DigitalBridge and Brookfield Infrastructure values GD Towers at $17.5 billion, including the assumption of net debt. Deutsche Telekom will retain a minority 49% stake in its tower subsidiary.
GD Towers operates more than 40,000 cell tower sites across Germany (over 33,000 towers) and Austria (over 7,000 towers). Deutsche Telecom is the anchor tenant of those towers. This means the portfolio should generate stable cash flows for Brookfield and DigitalBridge, helping to support Brookfield's attractive dividend.
However, this investment is more than securing the existing tower portfolio's contractually supported cash flows. DigitalBridge's CEO Marc Ganzi said, "The partnership being formed today is about building the next-generation digital infrastructure champion of Europe." He noted that the partnership combines "Deutsche Telekom's leading mobile network and market position, alongside one of the largest real asset managers in the world in Brookfield, combined with the digital infrastructure domain expertise of DigitalBridge."
That creates a team with the capabilities to support the growth of GD Towers to meet the growing needs of businesses and consumers across Europe. The partners will need to invest capital into GD Towers to support growing cell coverage needs, the rollout of 5G networks, and industry consolidation.
Brookfield's growing bet on data infrastructure
Brookfield has acquired several data infrastructure businesses in recent years. It has invested $1.9 billion for interests in telecom towers in India, France, New Zealand, and the U.K.; fiber-optic networks in France, Brazil, and New Zealand; and over 50 data centers worldwide. Meanwhile, it recently agreed to invest $200 million in privatizing Australian fiber services company Uniti Group.
Two factors drive its data infrastructure investments. First, data infrastructure assets generate stable, inflation-linked cash flow supported by long-term contracts. That provides the company with steadily rising earnings to support a growing dividend.
Second, these investments position Brookfield to capitalize on growing worldwide data consumption, which is on track to expand by 30% annually through at least 2025. Meanwhile, the company envisions a 100-year data upgrade investment opportunity to support the continued growth and evolution of the digital economy.
The growth in data usage will drive the need for more digital infrastructure in the future. That will provide Brookfield with two opportunities. It should be able to continue acquiring cash-flowing data infrastructure assets from operators like Deutsche Telekom that need the capital to continue expanding. Meanwhile, it will allow Brookfield to invest money into growing those assets at attractive returns.
The company is currently investing $500 million across several data infrastructure expansion projects, which it expects will produce 12% to 15% returns. These investments include data center expansions, new cell towers, and more fiber network expansion across the globe. These high-return investments will give Brookfield more cash flow to support future dividend growth. Brookfield aims to grow its high-yielding payout by 5% to 9% per year.
A great option for income and growth
Brookfield Infrastructure offers investors the best of both worlds: It pays an attractive dividend while providing solid growth prospects. The company is enhancing that growth profile through its partnership with DigitalBridge, positioning it to capitalize on the growing need for tower infrastructure in Europe. That will put it in an even better position to keep growing its dividend and deliver above-average total returns for investors in coming years.