Get Quality Yields up to 6.4% From 3 Brookfield Assets

I just bought units in Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY). The Brookfield companies are great investments for total-return and income investors alike.

Kay Ng ❯

Kay began investing in dividend stocks around 2008 via the concept of value investing. Since then, she has expanded into growth investing, including in small caps. Her passion for investing has only grown over the years! After graduating from UBC with a BSc in Computer Science, she took university courses in financial markets, finance, and financial accounting. She has contributed her works to Motley Fool, Sure Dividend, and Seeking Alpha.

Published February 10, 2016 9:44 am EST

In December and January, there were some nice opportunities to buy Brookfield Renewable Energy Partners LP (TSX:BEP.UN)(NYSE:BEP) units when it fell to $33 or lower. And last month Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) dipped below $46.

If you didn’t buy on those dips or didn’t hear about the companies until now, you haven’t missed out yet. Even with the 6-10% rally on the securities, you can still lock in above-average yields today.

Utility-income opportunities

At $36.40 per unit, Brookfield Renewable yields 6.4% assuming a foreign exchange of CAD$1.30 for US$1. Likewise, at $49.10 per unit, Brookfield Infrastructure yields 6%. These are still fair prices to pay for quality utilities whose distributions are well covered by cash flows. Any dips would be even better buying opportunities.

On top of that, Brookfield Renewable has increased its distribution for six consecutive years. It just hiked its quarterly distribution by 7.2% in the first quarter. If it maintained that higher distribution, this year would be its seventh annual consecutive increase.

Likewise, Brookfield Infrastructure has increased its distribution for eight consecutive years. It just hiked its quarterly distribution by 7.5% in the first quarter. If it maintained that higher distribution, this year would be its ninth annual consecutive increase. Both companies target average distribution growth of 5-9% per year in the foreseeable future.

Since I already own units in Brookfield Renewable and Brookfield Infrastructure, I was looking for an entry point in another company that is also managed and largely owned by Brookfield Asset Management Inc., Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY).

The opportunity to buy Brookfield Property finally came. I bought some units in my RRSP when it dipped around $27 on February 9. At closing, it yielded 5.3% (with a foreign exchange of CAD$1.30 for US$1) at $27.30 per unit.

About Brookfield Property

Brookfield Property gives investors access to a portfolio of world-class commercial real estate assets. Its portfolio consists of more than 150 premier office properties totaling 98 million square feet, nine million square feet of office development projects, and 170 best-in-class retail malls totaling about 154 million square feet. Additionally, it also holds interests in multi-family, triple net lease, industrial, and hospitality assets.

About 60% of its portfolio is in core office property assets, 30% is in core retail property assets, and 10% is in opportunistic and development investments. Brookfield Property’s “cream of the crop” properties are primarily in the United States (67%), followed by Europe (19%), Canada (6%), Australia (6%), Brazil (1%), and India and China (1%).

From Brookfield Property’s December 2015 presentation: “68% of our office net operating income is derived from New York, London, Sydney, Washington, D.C. and Toronto. These are among the largest and most resilient markets in the world’s strongest economies.”

Brookfield Property anticipates organic net operating income to drive funds from operations per-unit growth of 8-11% per year. This growth rate gives a cushion for its distribution growth guidance of 5-8% per year.

Most recently, Brookfield Property hiked its distribution by 5.7% in the first quarter. If it maintained this higher quarterly distribution for the rest of the year, this year would mark its third consecutive increase.

Conclusion

The three Brookfield companies, Brookfield Renewable, Brookfield Infrastructure, and Brookfield Property, own quality assets with stable, growing cash flows. For income-oriented investors, their above-average 5.3-6.4% yields are safe, and the companies anticipate to increase the yields by at least 5-8% on average per year.

For total-return investors, Brookfield Renewable and Brookfield Infrastructure are priced at about fair value, while Brookfield Property looks attractive because of its price dip. All three companies are strong buys for long-term portfolios.