Brookfield Infrastructure Partners (BIP -0.80%) has a strong embedded organic growth profile. The global infrastructure operator believes inflation, economic growth, and expansion projects can drive mid- to high-single-digit earnings growth over the next several years.
However, it's not resting on its laurels. The company continues to actively manage its portfolio to drive faster growth, recently unveiling its latest move to supercharge its growth rate.
Securing another deal
Brookfield Infrastructure Partners and its institutional partners have agreed to acquire Triton International (TRTN) in a cash-and-stock deal valuing the company's equity at $4.7 billion. Brookfield Infrastructure and its partners are paying $68.50 per share in cash plus $16.50 per share in stock, consisting of shares in its corporate subsidiary Brookfield Infrastructure Corporation (BIPC -1.04%). The combined value represents a 35% premium to Triton's closing share price the day before the deal's announcement.
Brookfield Infrastructure will invest $1 billion of equity into the deal, including the shares of Brookfield Infrastructure Corporation. After factoring in the assumption of Triton's debt, the total enterprise value of the transaction is $13.3 billion. Brookfield Infrastructure expects the transaction to close by the fourth quarter of this year.
Triton is the largest lessor of intermodal freight containers globally. Those leases supply the company with stable high-margin cash flow. Because of that, Brookfield Infrastructure's investment in Triton will earn a high going-in cash yield despite the hefty deal premium, providing further support for Brookfield's dividend. Brookfield expects to continue investing in expanding Triton's operations, which should grow its stable cash flows.
Enhancing the growth profile
The Triton transaction continues an active period of capital deployment for Brookfield Infrastructure. The company has invested over $5 billion into new assets over the last two years, including securing $2.9 billion across five deals last year. These acquisitions are helping significantly enhance Brookfield's growth rate.
In 2022, Brookfield Infrastructure grew its funds from operations (FFO) by 20% overall and 12% per unit/share basis. Half that growth came from organic sources, including elevated inflation and expansion project completions. The other half came from the uplift of its capital recycling strategy of selling mature assets and deploying the capital into higher-returning investments.
That strategy provides Brookfield with lots of momentum in 2023. Earlier this year, the company closed the largest two investments it secured in 2022, telecom tower operator DFMG and residential infrastructure provider HomeServe, which will boost its bottom line in the coming quarters. Add in elevated inflation and the full benefit of its recently completed Heartland Petrochemical Complex in Canada, and those deals will help drive 10%+ FFO per unit/share growth this year.
The company could maintain that double-digit pace for another year now that it has secured the Triton deal. Brookfield Infrastructure expects its embedded organic drivers to power 6% to 9% annual growth in its FFO per share/unit over the long term. With inflation still running hot and its U.S. semiconductor foundry project with Intel scheduled for completion in 2024, the company could deliver high-end organic growth in 2024.
Add in the accretive Triton investment that should close by year-end, and Brookfield should have plenty of power to achieve double-digit FFO per share/unit growth next year. Meanwhile, it still has an active investment pipeline, potentially giving it more fuel to grow in 2024.
That increasingly visible growth profile should give Brookfield Infrastructure plenty of power to continue increasing its dividend. The company gave investors a 6% raise earlier this year, marking its 14th consecutive year of dividend growth. It expects to increase the payout at a 5% to 9% annual pace in the coming years.
Adding more power to the growth engine
Brookfield Infrastructure has several organic drivers to power healthy earnings and dividend growth in the coming years. It's enhancing its already strong organic growth profile by making accretive acquisitions like Triton International. By supercharging its growth rate, Brookfield could produce strong total returns in the coming years.
