Valued at a market cap of US$13.3 billion, Brookfield Infrastructure Partners (TSX:BIP.UN) has underperformed the broader markets significantly in recent years. While the TSX index is down 5% from all-time highs, BIP stock is down almost 30% from record levels. However, the pullback allows you to buy quality stock at a discount and benefit from outsized gains in the upcoming decade. Let’s see why.
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Is the TSX stock a good buy right now?
Brookfield Infrastructure Partners offers investors exposure to a diversified portfolio of high-quality assets in the utilities, midstream, transport, and data infrastructure sectors.
In 2024, BIP reported funds from operations (FFO) of US$3.12 per unit, representing a 10% year-over-year growth when normalized for foreign exchange impacts. BIP maintained its impressive track record of distribution growth, increasing its quarterly payout by 6% to US$0.43 per unit (US$1.72 annualized). It was the company’s 16th consecutive year of distribution increases within or above its target range of 5-9%.
The infrastructure operator achieved its capital recycling target for the year, securing US$2 billion in proceeds from strategic asset sales. This disciplined capital-recycling approach has continued into 2025, with approximately US$850 million in proceeds already secured in the first month.
A key strength of BIP’s portfolio is its growing exposure to digital infrastructure. Over 60% of its FFO is derived from sectors at the forefront of digital transformation, including data centers, midstream assets, and utilities. This allows Brookfield Infrastructure to capitalize on what management describes as “the leading investment theme in infrastructure today.”
Brookfield made progress in this space in 2024, advancing its backlog of organic growth projects weighted toward digital infrastructure. Notably, BIP secured approximately US$5 billion in financing for its North American and European hyperscale data center platforms to support contracted growth projects.
The bull case for the TSX dividend stock
Around 70% of its EBITDA (earnings before interest, tax, depreciation, and amortization) is tied to inflation, with another 15% protected through fee-for-service models. This has contributed meaningfully to FFO growth, averaging more than 5% annually on a compounded basis over the past three years.
Moreover, BIP has proactively managed its capital structure, completing over US$9 billion in non-recourse financings in 2024. With a weighted average debt maturity of eight years and 90% fixed-rate debt, BIP is well-positioned to benefit from inflation while mitigating interest rate risks.
Brookfield Infrastructure is targeting between US$5 and US$6 billion in asset sale proceeds over the next two years, which will fund its pipeline of growth opportunities. Digital infrastructure remains the key focus, with the data sector accounting for over 40% of future capital deployment and expected to become BIP’s largest sector within five years. Management expects strong organic growth in 2025 at the high end or above its 3-4% target range.
The underperformance of the TSX stock has meant it currently offers shareholders a tasty dividend yield of 5.1%. Given its annual dividend of US$1.72 per share, BIP ended 2024 with a payout ratio of 55%, which is sustainable. Priced at nine times trailing FFO, BIP stock is very cheap and trades at a discount of over 45% to consensus price targets.
