I am always in search of a good dividend play when stock investing. Today, I would like to take a look at a REIT that I have covered quite a few times previously. I bought a position in the stock a few years ago and sold it off in November when shares looked expensive to me.

The REIT in question is Brookfield Infrastructure Partners (BIP).

Brookfield Infrastructure Partnership is a limited partnership that was spun off from Brookfield Asset Management (BAM) in 2008. I received shares of this company from my investment in BAM. Brookfield Infrastructure Partnership owns and operates all of the infrastructure assets for Brookfield Asset Management including its electricity transmission systems, timberlands, and social infrastructure.

One of the things that I like about Brookfield is that the stock is not well covered by Wall Street. There are not teams of analysts following the stock because of its small market cap. I was reading the company’s most recent earnings report for Q3 and came up with the following key points. (Q4 earnings will not be out until Friday).

Brookfield Infrastructure Stock Analysis

Brookfield’s shares are trading for $21.90 and the stock is currently yielding 5.1%. The dividend is very appealing since Brookfield is currently paying out a dividend of $1.10 per share despite earnings being below this level. The payout ratio is a concern since the company is only expected to earn 64 cents for the full year. Fortunately, Brookfield should be able to generate enough free cash flow to maintain its dividend.

The company is continually seeking to expand its infrastructure operations across the following platforms.

• Energy – electricity and natural gas transmission, electricity and natural gas distribution
• Transportation- ports, railroads, tollroads, and airports
• Timber
• Other infrastructure – social infrastructure and industrial infrastructure

I love the asset quality of  Brookfield Infrastructure. The company has an a well diversified portfolio of assets. The bulk  of the company’s assets are split between investments in utilities, transportation infrastructure, and timber. The remaining portion of assets are invested in social infrastructure projects. The company’s owns and manages assets in Australia, Canada, Chile, Europe, New Zealand, the United Kingdom, and the United States.

Brookfield has recently strengthened its asset portfolio by merging with Prime Infrastructure last December. The Prime Infrastructure merger will help to bolster earnings in the transport and energy sector in particular.  The merger will give the company greater access to capital and increase its growth rates. Brookfield is not done making acquisitions. The company is looking to acquire Abbot Point Coa Terminal for $1.5 billion dollars.

Brookfield Asset Growth

Brookfield is targeting 12 to 15% growth in assets each year. Brookfield seeks to pay out 68 to 80% of funds from operations out to shareholders via distributions.

The company has done an outstanding job of growing its revenue. In the 3rd quarter of 2010, Brookfield increased its funds from 0perations to $55 million dollars from $12 million dollars. That’s revenue growth of 358%.  Funds from operations were up 63% per unit.The company had an adjusted AFFO yield of 8%.

Here is a snapshot of the company Q3 earnings breakdown.

FFO by segment Utilities $ 43 Transport and energy 20 Timber -- TBE gain -- Corporate (8) ----------
FFO $ 55

As you can seek utilities accounted for 78% of total revenue. Brookfield did a great job of increasing its utilities revenue from just $14 million in 2009 Transport and energy added 22%. The $20 million dollar figure is impressive especially considering the fact that the company had no revenue from this sector in Q3 of 2009. The timber sector contributed nothing to revenue. due to log pricing issues. The $0 figure is not a big deal since Brookfield only made $1 million dollars from the sector in Q3 2009.

The Future For Brookfield Infrastructure

Earning per share is pegged to come in at 16 cents per share next quarter. The company has historically traded at a multiple of 16.  Right now, shares are trading at about twice that number with a P/E of 31. Shares are trading at 1.2 times book value.

As I told investors last November, I sold off my position in Brookfield after making a nearly 50% profit on its shares. I had a projected price target of $23 and the stock hit that level. I am however looking for an entry point to get back into Brookfield Infrastructure. I love the long term prospects of the company but do not want to overpay for its shares. Price is always an important considering when you are looking to make money investing.

I will be paying close attention to Brookfield’s Q4 earnings before I make a decision about whether to buy back into the stock or remain on the sidelines.

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