Rinse-And-Repeat Is Fine For Brookfield Infrastructure Partners

 

Not messing with a good thing is a surprisingly hard thing for many corporate managers to do, but Brookfield Infrastructure Partners L.P. (NYSE:BIP) has continued to execute on a disciplined program of buying assets in target end-markets (particularly regulated utilities, rail, midstream, and datacomm), operating them well, and then selling the assets and recycling the capital when the right opportunities present themselves.

With that, these units have generated an annualized return over 23% (with reinvested distributions) since my last update, beating the S&P 500, and a 10-year annualized return (again with reinvested distributions) of over 20%. Strip out the reinvestment part of the calculation and you’re still talking about a 17% annualized total return over the past decade, not to mention the potential benefits to some investors from the partnership structure.

Given how low rates have pumped up most assets and asset classes, I’m honestly surprised that BIP trades at a yield close to 4% and below my fair value estimate (with an underlying assumption of around 7% to 8% long-term free cash flow growth). While these units are not appropriate for everyone, and some investors should consider Brookfield Infrastructure Corporation (NYSE:BIPC) instead, I do still like BIP as a long-term holding.

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Rinse-And-Repeat Is Fine For Brookfield Infrastructure Partners