Founded in 2019, Brookfield Infrastructure Corporation (BIPC) is a New York City-based regulated natural gas transmission systems operator.
The company has been paying quarterly dividends consistently since last year. In fact, BIPC increased its quarterly dividend payout by 5.2% to $0.51 this year. Shares of BIPC have gained 24.4% in price over the past year.
So, here’s why we think income investors should invest in shares of BIPC:
BIPC pays $2.48 as dividends annually, yielding 3.2% at its current share price. Its 31.43% trailing-12-month operating earnings yield is 277.8% higher than the 8.32% industry average. Furthermore, the stock’s 10.6% trailing-12-month free cash flow yield is 99.7% higher than the 5.31% industry average.
Restructuring of Operations
BIPC is currently acquiring Inter Pipeline Ltd. for $21.23 per share. The acquisition is valued at CAD16 billion ($12.62 billion). It has already paid for 253.17 million common shares of Inter Pipeline attendant to its take-over bid. BIPC currently has a 68.7% stake in Inter Pipeline.
In July, BIPC sold its North American district energy business Enwave for approximately $4.10 billion. The company generated $1 billion in net proceeds from the sale, while its corporate liquidity stands at around $4 billion. These funds are expected to finance BIPC’s growth initiatives.
Also in July, BIPC formed a joint venture with the leading cloud and carrier-neutral data center, Digital Realty, to operate institutional quality data centers in India. The move should allow BIPC to expand its business to the second-largest internet market, providing a key growth opportunity.
The company currently has $20 billion worth of assets under management in the country. Regarding this, BIPC Managing Director and Head of India & Middle East, Arpit Agrawal, said, “Through the development of a high-quality, multi-city, India-focused data center platform, we believe BAM Digital Realty is well positioned to play a meaningful role in addressing the large and growing data demand in the country and to offer a differentiated solution to customers.”
BIPC’s trailing-12-month revenues came in at $1.54 billion, up 1.4% year-over-year. Its $1.27 billion gross profit translates to an 82.52% margin, which is 92.2% higher than the 42.94% industry average. Its trailing-12-month EBITDA and operating income stood at $1.23 billion and $946 million, respectively. Its EBITDA margin and ROTC of 79.99% and 16.58%, respectively, compare favorably with the industry averages.
The company’s trailing-12-month net operating cash flow and levered free cash flow came in at $741 million and $1.81 billion, respectively. In addition, its 117.7% levered free cash flow margin is significantly higher than the negative 7.46% industry average.
POWR Ratings Reflect Rosy Prospects
BIPC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
BIPC has a B grade for Growth. This is justified because its FFO increased 18% to $394 million in its fiscal second quarter ended June 30.
Of the 56 stocks in the Utilities – Domestic industry, BIPC is ranked #1.
Beyond what we’ve stated above, we have rated the stock for Value, Momentum, Sentiment, Stability, and Quality. Get all BIPC ratings here.
Because the COVID-19 Delta variant threatens the economic recovery, the Fed is expected to keep benchmark interest rates at near-zero levels in the near term. Furthermore, surging volatility in the stock markets, as evidenced by the CBOE Volatility index’s 8.1% increase over the past three months, has made income investing a popular strategy to offset the systemic risks. Thus, we think dividend stock BIPC, with its promising growth prospects, is an ideal investment bet now.
How Does Brookfield Infrastructure Corporation (BIPC) Stack Up Against its Peers?
BIPC has an overall POWR Rating of B, which equates to a Buy rating. This rating is superior to its peers within the Utilities – Domestic Industry, such as Atlantic Power Corporation (AT), UGI Corporation (UGI), and Otter Tail Corporation (OTTR), which are all rated C (Neutral).
BIPC shares were trading at $62.37 per share on Thursday afternoon, down $1.32 (-2.07%). Year-to-date, BIPC has declined -11.78%, versus a 20.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…
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