With the S&P 500 up over 15 percent this year, bargains are few and far between at this very moment. And while you sit on your cash, and likely earn only a measly interest rate on it, there is a company which has missed the broad market rally, and pays a siren song of a dividend at 4.75 percent. Not to mention, even though this company owns businesses that "a monkey could run", it has solid management, and a fairly unassailable market position.
I'm talking about Brookfield Infrastructure Partners (NYSE:BIP), and as soon as the Motley Fool's trading restrictions allow, I'm buying.
Brookfield Infrastructure owns a cornucopia of infrastructure assets. This includes electric transmission lines, natural gas connections, railroad tracks, ports, and toll roads. As Brookfield describes itself, it "operates high quality, long-life assets that generate stable cash flows, require relatively minimal maintenance capital expenditures and, by virtue of barriers to entry and other characteristics, tend to appreciate in value over time." These assets span the globe, in every continent except Africa and Antarctica.
The management appears to be quite keen on when to sell assets in order to find better investments. With the return of the housing market, and subsequently the timber that builds these houses, Brookfield took the opportunity to sell its timberland earlier this year, generating $640 million before taxes. Brookfield also sold a portion of its Australian regulated distribution business for $410 million which it originally acquired in 2009.
All this capital is already finding its way to new investments, like the $490 million investment announced last week in Brazilian toll roads. Brookfield hopes to return 12 to 15 percent in the long-term on this investment, citing increases in traffic, toll rates tied to inflation, and an expanding network of roads. Before this announcement, Brookfield listed $2.5 billion in liquidity, for which CEO Sam Pollock says, "we are confident that we will be able to quickly redeploy this capital at attractive returns."
Brookfield is a master limited partnership, or MLP, which means it receives a different tax treatment than a regular corporation. This does cut into the 4.75 percent yield, but it still remains a high yielding investment. The downside to Brookfield is limited due to the predictable cash flows from its infrastructure investments, as well as its industries' abilities to weather downturns. And if a downturn should come, it just means more deals for Brookfield to snap up on the cheap to sell in the future. This is a long-term holding that can capitalize on a poor economy and slowly build value during boom times.
And returning value to shareholders
Fool contributor Dan Newman has no position in any stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool owns shares of Brookfield Infrastructure Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.