When you're in your prime, nothing can stand in your way.
Now that Brookfield Infrastructure Partners (NYSE: BIP) has moved to acquire the remaining outstanding shares of Australia's Prime Infrastructure -- in a deal valued at about $1.4 billion -- I submit that this generous dividend payer is poised to become an unstoppable engine of long-term cash flow.
Nearly two years ago, I made a wish. Given my forecast for deep and sustained weakness in housing and construction, I wanted to see Brookfield Infrastructure Partners (let's call it "BIP") diversify away from its timberland-heavy asset portfolio with a move into transportation and utility plays. I sought to steer Fools clear of heavily exposed timberland operators like Weyerhaeuser (NYSE: WY), and I issued repeated warnings about building material producers USG (NYSE: USG) and Cemex (NYSE: CX). For this Fool, BIP's pending move to consolidate ownership of a diverse global asset portfolio is proof that wishes do come true.
Unlike the Los Angeles school district that managed to spend nearly $1.2 billion building only three public schools, let's take a look at what BIP will be getting for its $1.4 billion investment. BIP will become the proud owner of the Dalrymple Bay Coal Terminal in Queensland, Australia. As Peabody Energy (NYSE: BTU) noted in a recent earnings report, this strategic coal export facility is already operating at record volumes following a capacity expansion to 85 million tonnes per year. I view Australian coal exports as one of the premier long-term growth industries in the world today, and therefore I consider BIP's ownership of this facility a prime driver of reliable income.
Although I consider the coal terminal the star of BIP's acquired portfolio, we have quite a supporting cast to recognize. Prime holds a 26.4% stake in Kinder Morgan Energy Partners' (NYSE: KMP) NGPL natural gas pipeline, which spans more than 15,000 kilometers. Transportation plays include an extensive rail network in Western Australia, and a majority interest in seven port facilities located throughout Europe. Energy utilities in places like New Zealand and the U.K. round out a first-rate, well-diversified portfolio.
Brookfield Asset Management (NYSE: BAM), which created BIP as a spin-off in 2008 and played an instrumental role in facilitating these deals, will end up holding a 28% to 39% stake in BIP.
BIP boasts that this latest deal will be immediately accretive with a 27% boost to funds from operations. The company also pledged a 13% dividend hike for 2011 to $1.24 per unit, and stated its intention to increase payouts by 3% to 7% per year over the long term. Given the highly predictable nature of cash flow from most of BIP's core assets, I believe Fools can expect the company to make good on those intentions.
For Fools seeking resilient plays to ride out this extended period of economic uncertainty, I consider BIP a superior combination of deep value and reliable income. I have reinitiated my bullish stance on BIP within my Motley Fool CAPS portfolio, and I invite you to join in the fun and cast your vote today.
