Companies that pay above-average dividends don't typically grow very quickly. They're usually in mature industries that lack appealing growth prospects. As a result, they tend to pay out more of their earnings via dividends than they retain for reinvestment.
That makes Brookfield Infrastructure (BIPC +0.00%)(BIP +0.85%) stand out. The global infrastructure company operates many slower-growing businesses like utilities and energy midstream assets that generate lots of cash. This allows it to pay a high-yielding dividend of around 3.5%, roughly double that of the S&P 500.
However, it's also growing briskly. Because of that, Brookfield is a great option for those seeking growth and income.
NYSE: BIP
Key Data Points
A record showing
Brookfield Infrastructure's growth capabilities were on full display during the third quarter. The company grew its funds from operations (FFO) to a record $525 million, a 24% increase, compared to the prior year. Meanwhile, it delivered more than 15% FFO per-share growth after factoring in the dilution from issuing stock to finance some new investments.
The company delivered 10% organic growth in the quarter. It benefited from inflation-linked rate-escalation clauses in its contracts, allowing it to capitalize on elevated inflation levels. Brookfield's other organic-growth driver was the completion of $1.2 billion in expansion projects over the past year.
In addition, Brookfield got a boost from closing $2 billion in acquisitions. It acquired a diversified Canadian midstream company that helped grow FFO from its midstream segment by 65%. It also closed the acquisition of two Australian utilities earlier this year.
Those deals helped more than offset the impact of asset sales. Those divestitures are part of the company's capital-recycling program of selling mature assets to finance higher-returning new investments.
Locked in growth for 2023 and beyond
Brookfield is on track to grow its FFO per share by 20% in 2022 after removing some one-time items from last year. Half of that increase will come from organic expansion, and the other half from its asset-rotation strategy.
Meanwhile, Brookfield's investments in 2022 set it up to deliver another strong year of growth in 2023. It's currently working to close two more transactions that will provide a boost in 2023 and beyond.
It's investing $1.3 billion into the acquisition of HomeServe. Brookfield plans to accelerate that company's growth by expanding its existing residential-infrastructure product and service offering to a wider customer base. It's also investing $600 million to acquire a telecom tower company in Germany and Austria. That deal comes with a large pipeline of tower developments that Brookfield expects to build over the next five years.
In addition to the boost from those deals, Brookfield sees continued elevated inflation and the upcoming completion of additional expansion projects powering strong organic growth in 2023. These factors should drive FFO per share up by another 12% to 15% next year.
Brookfield has already met its investment objectives for next year, thanks to the acquisitions it has in the pipeline. However, it has the financial flexibility to make additional acquisitions should compelling opportunities arise. Given the current macroeconomic uncertainty, Brookfield could face less competition for deals, making future transactions even more accretive.
Longer term, Brookfield believes its existing businesses can generate 6% to 9% annual organic FFO per-share growth, easily supporting its plan to grow its dividend by 5% to 9% per year. Drivers include:
- Inflationary-linked contract-rate escalations
- Volume growth as the global economy expands
- Development projects
On top of that, Brookfield's capital-recycling strategy can continue enhancing its organic growth. These drivers have enabled Brookfield to grow its FFO per share at a double-digit annual rate over the last decade, a pace it could maintain in the coming years.
The best of both worlds
Brookfield Infrastructure offers investors something they don't often find. It pays a high-yielding dividend and grows at a high annual rate. Because of that, it has a long history of producing market-beating total returns. With plenty of income and growth ahead, Brookfield is a great stock for those seeking a potentially high-returning investment opportunity.
