It’s no secret that North America is in dire need of a massive reinvestment in its infrastructure.
Roads in many North American cities are in disrepair, bridges need to be built, not to mention expanding capacity in hospitals for a rapidly aging population and schools that need to be built to foster the growth of future generations.
Thankfully, the Canadian federal government has taken notice and has launched its “Investing in Canada” plan, which will see the government dedicate more than $180 billion over the next 12 years to invest in various infrastructure initiatives.
The bulk of the spending will go towards improvements in public transit, an area where Canada lags many developed nations, with a large portion also going towards investments in green infrastructure, including major investments in clean water initiatives and building capacity for clean sources of energy that will fuel the country for the next century.
But the government can’t do it all on its own, and that’s where Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) comes in.
Brookfield is one of the world’s largest investors, owners, and operators of infrastructure assets globally.
Brookfield generates value by taking control of infrastructure assets, operating them to generate stable and consistent cash flows backed by long-term contracts, and strategically monetizing its investments by exiting them at the opportune time.
While Canada is currently undergoing a major infrastructure initiative, it’s far from being the only major nation to be doing so.
The United States, France, Germany and the United Kingdom all need to dedicate resources to infrastructure over the coming decades.
One of the nice things about Brookfield’s operations is that they are well diversified by sector and geography, so the company’s portfolio is far from being concentrated or at risk owing to a single counterparty, regulatory regime, or market cycle.
Another quality that makes Brookfield great, particularly for long-term investors or those considering adding the company to their TFSA, is that the company’s contracts are tied to inflation. This means that the company’s long-term contracts can be readjusted for price increases, so as to eliminate the risk that Brookfield gets itself in a situation where the contract is generating sub-optimal returns.
Essentially, the company receives predictable cash flow streams from its contracts, like a fixed-income investment, which are protected by inflation (which most bonds don’t offer), while simultaneously offering for the potential for capital appreciation, as long as the company can continue to earn a return on its investments that are above the cost of capital.
On top of all that, Brookfield shares offer an enticing yield of 4.03% today, which is nothing to shake a stick at.
And the company has been increasing its dividend by an average of 10% per year for the past 10 years and offers the promise of the same for years to come.
Bottom line
An investment in Brookfield Infrastructure Partners offers an enticing combination of some of the best qualities found in fixed-income, dividend, and capital investments.
On top of all that the company operates as a global leader in an industry that is in dire need of investment both in Canada and abroad.
Foolish investors should keep a watchful eye on Brookfield shares, maybe waiting for a slight pullback to the company’s 200-day moving average for the chance to buy this blue-chipper on the dip.
