Brookfield Infrastructure Partners (BIP.UN.TO)

SNC-Lavalin (SNC-T) or Brookfield Infrastructure (BIP.UN-T)?Infrastructure stocks have been particularly strong lately, and a lot of that has come post the Trump victory and expectations that there is going to be more spending, etc. Things have gone up a little too fast, so he would be a little wary of stepping into these at this point in time. He prefers Aecon (ARE-T) whose valuation seems to be a little better in terms of what he can expect to earn over the next few years.

(A Top Pick Jan 28/16. Up 43%.) They’ve been very active in 2016. Have been buying toll roads, cell towers, as well as cell towers in Brazil. There was an 11% distribution increase in 2016, and probably should expect more in 2017. Pretty much the only infrastructure company you can buy in Canada, with such diversified assets. Not cheap, but there is a moat around that kind of business. The scarcity value of the assets make it attractive. He would look to buy this on pullbacks.

They are very good at what they do. They put a lot of money to work in Brazil because they found bargains there. The stock is not as cheap as it was, but they can sustain AFFO.

A good company, and in a good space. Pays a dividend. Doesn’t think you have anything to worry about.

Just announced a $750 million equity offering, that is $1 below market price. Normally a new offering can seem to be dilutive, and you see a drop. That may be seen as a very early sign that they are able to raise such a large equity offering. A good infrastructure stock and an area you want to be in.

He was debating making this a Top Pick. A name he really likes because it is very globally diversified. Prior to the election outcome, he really liked the infrastructure sector as he felt that more and more institutions would be allocating capital to the infrastructure sector globally. This is a good way for investors to participate in infrastructure. Very stable yield with very good potential for mid-single digit cash flow and dividend growth.

It has come down due to bond yields. He thinks it is a knee jerk reaction. It has exposure to Brazil who have been in the dog house for a couple of years. There is some risk there, but seems to be under a new political regime. He thinks the company is safe. 4.8% dividend yield.

This has had a great run. It is a nice, diversifying investment in terms of what they own. They do international infrastructure, so we are talking of almost pension-like fund toll roads in Brazil, hydroelectric projects globally. It has had a pretty good run, so he would wait to see interest rates, where there could be a pullback in all these types of names.

This has gone straight up and has really had no dips. Every year they raise the distribution. Currently it is trading at a premium valuation. It is the only infrastructure play that you can buy in Canada that gets you similar assets like a Teachers pension plan, etc. They have pricing power, so every year they raise the prices to their customers. They are very smart in using their balance sheet. If a long-term investor, this would be a core holding in your portfolio.

If you are looking for a steady yield this one is okay. He normally goes to the parent (BAM.A-T) because then he does not have to figure out which one to own at the time. Each one moves slightly differently at different times of the cycle.

(Market Call Minute.) For a long-term hold, this would be a great time to enter.

Everybody loves infrastructure right now, and this one was there before pretty much anybody else. They are very, very good at it. He likes this.

He likes the Brookfield group. They are terrific managers and have great assets. They like growth. Own them all and spread your risks.

Payout ratio is around 60%-70%. They want to raise their distributions 11%-13% annually. Just upped the dividend by 3.5%. He is modelling that they can grow their AFFO 18% compounded annually. The only bad thing is that you have to pay up for this. Right now it is trading at around 14X 2016 earnings versus a 5-year average of around 13.8.

This fits in with his infrastructure theme. If you want to buy a global infrastructure company, this is the “go to” name. His dividend growth target is 7%-9% a year. FFO growth and cash flow growth of 12%-15% a year for the next few years.