This Exceptional Dividend Stock Trades at a Bargain-Basement Price

Brookfield Infrastructure Partners (BIP 0.31%) is an incredible bargain these days. The global infrastructure operator trades at an extremely cheap value compared to the broader market and its corporate twin Brookfield Infrastructure Corporation (BIPC 0.91%). Because of that, it offers an attractive dividend yield and significant upside potential.

Those features make it look like a great investment.

Extremely cheap for no apparent reason

Brookfield Infrastructure is coming off another strong year. The company grew its funds from operations (FFO) by 12% per unit/share last year to £2.71. It expects FFO per unit/share to expand by at least 10% this year.

That would put it around £3 per unit/share. The corporate shares currently trade at around £44. That price point implies that Brookfield Infrastructure Corporation trades at about 14.7 times its forward earnings.

That’s cheap, considering the S&P 500‘s forward price-to-earnings (PE) ratio is 17.5.   What’s remarkable is that the economically equivalent partnership units trade at an even lower price point of £32 per unit. This level gives them a forward earnings multiple of 10.7.

That’s a bargain-basement price compared to its corporate twin and the broader market. There’s no discernible reason for the massive disconnect. The two entities own the same assets with equal shares of the underlying company’s earnings and distributions.

While many investors prefer to own corporate shares over partnership units for tax reasons, we don’t see quite as wide a discount between Brookfield Corporation‘s renewable energy affiliates Brookfield Renewable Partners and Brookfield Renewable Corporation: BEP Chart

BEP data by YCharts.

More income from the same entity

A big benefit of the massive disconnect between the value of Brookfield Infrastructure Partners and its corporate twin is a much higher dividend yield. Both entities pay the same quarterly rate of £0.3825 per unit/share following a 6% increase in the payment rate earlier this year.

However, given its lower price, the partnership units offer a much higher income yield of 4.76% versus 3.46% for the corporate shares.  Put another way, a £1,000 investment in Brookfield Infrastructure Partners would generate £47.60 of annual passive income. Meanwhile, that same investment would only generate £34.60 of dividend income from Brookfield Infrastructure Corporation.

That’s 37.6% more income from the same entity. The income will only grow from there. Brookfield Infrastructure has an exceptional track record of increasing its distribution to investors.

It notched its 14th straight year of payment growth in 2023. The company expects to increase its payout by 5% to 9% per unit/share annually. Assuming a 5% growth rate, a £1,000 investment in partnership units would generate £60.75 of annual passive income in five years compared to £44.16 from the corporate shares. 

The company should have no problem achieving its dividend growth target. Brookfield Infrastructure expects to grow its FFO per unit/share organically at a 6% to 9% annual rate over the long term. Driving that forecast is inflation-linked contractual rate increases (3% to 4% per year), volume growth as the economy expands (1% to 2% per year), and expansion projects (2% to 3% per year).

Meanwhile, the company can enhance its growth rate through capital recycling, a strategy of selling mature assets and redeploying the proceeds into higher-returning investments. High-end organic growth and capital recycling are helping drive double-digit annual FFO growth in 2022 and 2023.

A gift for income investors

Brookfield Infrastructure Partners trades at a massive discount to the market and its corporate sibling. Because of that, it looks like an incredible investment opportunity.

The higher-yielding payout alone will enable investors to generate a lot more passive income in the coming years.   Matthew DiLallo has positions in Brookfield Corporation, Brookfield Infrastructure, Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Brookfield Corporation and Brookfield Renewable.

The Motley Fool recommends Brookfield, Brookfield Infrastructure Partners, and Brookfield Renewable Partners.

The Motley Fool has a disclosure policy.

bhs listed on couponmatrix.ukbook-my-garage listed on couponmatrix.ukchiquito listed on couponmatrix.ukinsurance4carhire listed on couponmatrix.ukneals-yard-remedies listed on couponmatrix.uktessuti listed on couponmatrix.uk
bhs listed on couponmatrix.ukFrom high-street icon to online powerhouse, British Home Stores (or BHS) has adapted well to shopping over its near ten decade tenure. Now specialising in home lighting and textiles, customers can make the most of the latest BHS discount code and secure savings on their new home essentials. Whether you’re a first-time house buyer or a dedicated interior designer, find the right light for your passion project with BHS.
book-my-garage listed on couponmatrix.ukWhen your vehicle next needs a tune-up, always go through Book My Garage to get the best price possible. A space that allows you to compare and pick between dozens of local garages near you, it’s as cost-effective as it is convenient when there's a Book My Garage promo code to use with your booking. From the smallest filter change to a comprehensive service of your vehicle, find all you need to drive with ease at Book My Garage.
chiquito listed on couponmatrix.ukAs the largest Mexican and Tex-Mex restaurant in the UK, you know Chiquito is doing something right. Grab one of our exclusive Chiquitos vouchers and enjoy a tasty Mexican feast or a delicious cocktail for less. Whether it’s the fresh ingredients, fantastic serving staff or bubbly atmosphere that draws you inside, you’re always in for a treat with a trip to Chiquito.
insurance4carhire listed on couponmatrix.ukIf you're looking for a discount on your car hire insurance, then you've come to the right place! insurance4carhire offers a range of great value policies, and with our newest insurance4carhire discount code you can secure savings on the exact kind of cover you want. So whether you're hiring a car for a short break or a longer holiday, be sure to use insurance4carhire and protect you and your motor for less. At Groupon, we work hard to find the best deals and seasonal promotions so you can save money on your motor insurance. We know that hiring a car can be expensive, so we want to help you get the best possible price. Our up-to-date offers at insurance4carhire can save you even more on the brand’s already great value policies. So be sure to use it when you book your car hire insurance and enjoy the savings! One of the most popular insurance4carhire insurance policies is the comprehensive car hire insurance scheme. This policy provides cover for damage to your hire car, as well as liability cover in the event that you cause damage to someone else's property. And with an exclusive insurance4carhire promo code, you can save even more on this already great value policy! So be it for work or a trip away, be sure to use Insurance4carhire and protect your temporary motor from any unwanted scenarios.
neals-yard-remedies listed on couponmatrix.ukFrom humble beginnings in Convent Garden all the way back in the early 80s, Neal’s Yard Remedies has become one of the nation's most beloved names in beauty. Use our Neal’s Yard Remedies discount codes to save money when you shop the fantastic range. Neal Yard's natural beauty products and holistic remedies have won numerous awards from the likes of ELLE, Mother and Baby, Good Housekeeping, Free From, and Ethical Consumer, so you know you'll be bathing in only the best.
tessuti listed on couponmatrix.ukFor unbeatable style and seasonal wear, there’s no better place to shop than Tessuti. Stocking more than 100 men and women’s brands from respected designers including Calvin Klein, Fred Perry, Michael Kors and more, you’re sure to be grateful for a Tessuti discount code to help keep the costs low on that next spending spree. Find accessories, shoes and plenty more to add more luxury to your look and put the premium back into your apparel.