What Is Capital Recycling?

By Matthew DiLallo – Updated Jun 9, 2025 at 12:20 AM

Key Points

Capital recycling helps firms boost returns by selling low-yield assets to fund high-yield investments.
This strategy reduces reliance on debt and equity issuance, avoiding share dilution and debt accumulation.
Brookfield Infrastructure exemplifies successful capital recycling, enhancing returns by reinvesting asset sale proceeds.

Capital recycling or asset recycling is a business investment and funding strategy. Companies will sell non-core, lower-returning assets and reinvest or recycle that capital into higher-returning opportunities. Capital recycling enables companies to improve their investment returns and limit their need for outside capital to finance their expansion.

Loading paragraph...

Silver dice reading Buy and Sell tumbling across a digital image of stock charts. — Image source: Getty Images.

Loading image...

Loading paragraph...

The Value Investing Strategy

Find out what value investing is and how to find value stocks that are poised to deliver shareholder gains over time.

Loading hub_pages...

The company is recycling that capital into several new investments. Brookfield Infrastructure bought an additional 10% interest in its Brazilian rail and logistics provider for $365 million, a more than 20% discount to its view of fair value. Brookfield also agreed to buy a portfolio of telecom towers in India for $150 million.

The company's capital recycling strategy enhances its ability to grow its funds from operations (FFO) per share. Historically, Brookfield Infrastructure has organically grown its FFO per share at a mid- to high-single-digit annual rate. With the added boost from capital recycling, it has delivered a double-digit annual FFO per share growth rate.

Loading paragraph...

About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

Matt DiLallo has positions in Brookfield Infrastructure and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.