Brookfield Infrastructure (BIP -0.09%) (BIPC -0.11%) has gotten clobbered this year. Shares have lost nearly a third of their value over the past three months alone, with its sell-off accelerating in recent weeks. That decline has pushed its dividend yield up to 5.7%.

That slump comes even though the company has delivered solid financial results this year and continued to deliver on its strategic objectives. The company now believes its shares are a screaming buy.

Built differently

In his third-quarter letter to investors, Brookfield Infrastructure CEO Sam Pollock wrote about the factors affecting the company's stock price. "Despite achieving solid financial results throughout the year and delivering on our strategic initiatives," he said, "Brookfield Infrastructure's unit price has disappointingly underperformed recently." That's not unique to Brookfield. Many utilities and other dividend-focused infrastructure companies have slumped as income-focused investors shifted their attention to credit investments and other sector strategies.

However, while Brookfield trades with those peers, it has several differentiating elements that the market seems to have overlooked. Pollock pointed out that "our sizable organic growth consists largely of embedded inflationary escalators and secured capital expansion projects." Brookfield's businesses index about 70% of their rates to inflation each year. That differs from its peers. Most have nominal-based tariffs, which base returns on the regulated asset base, not inflation. In an inflationary environment, the real value of their rates declines. In addition to its embedded inflation-powered growth, Brookfield largely self-funds its expansion project backlog with retained cash flows and committed capex facilities. That differed from utilities, which typically use the capital markets to fund capex.

That inflation indexation is noteworthy. It will add more than $100 million to Brookfield's funds from operations (FFO) this year. That's a huge competitive advantage in a rising-interest-rate environment, which Brookfield has already largely insulated itself from by locking in 90% of its debt at fixed rates with an average maturity of seven years. "This provides us with strong visibility into our borrowing costs over the next several years," wrote Pollock in the third-quarter letter. He further noted that even if rates rise by another 2%, that will have only a minor impact on its FFO of $25 million next year, $20 million in 2025, and $50 million in 2026. It will be able to more than offset the impact of higher rates by continuing to benefit from inflation-linked rate increases.

Getting too cheap to ignore

Brookfield Infrastructure is on track to grow its FFO by about 10% this year to $2.95-$3.00 per share, driven by inflation indexation, capital projects, and acquisitions. Given the slide in its unit price, which recently traded around $27 a piece, Brookfield sells for about nine times FFO. That's an extremely low valuation multiple. It's especially low for a company that expects to grow its FFO by more than 12% annually over the next three years, powered by its robust organic drivers like inflation-linked contracts and secured capital projects. That easily supports the company's plan to increase its high-yield dividend by 5% to 9% per year.

Pollock believes that the current market value of Brookfield's units doesn't reflect the intrinsic value of the business or its growth prospects. In light of this, he wrote: "We see the merit in deploying capital to repurchase our equity. Following quarter end, we began repurchasing equity and have bought close to 1 million units under our normal course issuer bid." Pollock further noted, "that the company will consider additional buybacks in addition to continuing to invest in high-returning new investment opportunities." That's a high bar considering that the deals it secured this year -- Triton, Data4, Compass Datacenters, and Cyxtera -- will "provide us with some of the best risk-adjusted returns we have seen in the last decade."

The CEO also highlighted that the company continues to confirm the underlying value of its assets by recycling capital. Brookfield has sold 16 businesses over the past three years, generating $4.5 billion in proceeds. Each sale was at a premium to the carrying value of the assets on its balance sheet, with an average gain over that book value of 70%. These sales are giving it more capital to invest in higher-return investment opportunities, which now includes buying back its attractively valued stock.

An extremely compelling investment opportunity

Brookfield's CEO laid out his case in the third-quarter letter for investing in the infrastructure giant. He noted that the company's differentiated strategy will continue driving strong growth at a time when its peers will face headwinds from higher rates. He therefore believes the recent sell-off in the share price is a buying opportunity, which the company recently capitalized on by repurchasing some shares. "Ultimately," Pollock concluded, "we believe providing strong cash flow and income growth creates unitholder value, which will be reflected in our unit price over time."