News & Analysis

Brookfield Infrastructure ups dividend

Fresh after acquiring equity stakes in eight Babcock & Brown Infrastructure-owned assets, Brookfield’s listed infrastructure fund has increased its quarterly dividend by 3.8%. Management also said they will seek to grow the firm’s distribution at an annual rate between 3% and 7%.

By
Cezary Podkul
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Brookfield Infrastructure Partners has increased its quarterly dividend by US$0.01, or 3.8 percent, squeezing more cash out of an enlarged portfolio of assets that now includes a number of deleveraged Babcock & Brown assets.

Managers of the New York and Toronto-listed infrastructure fund also said they will seek to grow the firm’s distribution at an annual rate between 3 percent and 7 percent “given the underlying growth profile” of its portfolio.

Chief executive officer Sam Pollock said in a statement the projected growth was strong enough that “even without a full recovery” of the firm’s troubled timber business, “our [dividend] payout ratio is near the bottom of our target range. For that reason, we are pleased our board of directors announced n increase of 3.8 percent of our quarterly distribution.”

In November 2009 the firm completed what Pollock called a “transformational” acquisition of equity stakes in eight infrastructure assets formerly owned by Babcock & Brown Infrastructure, the Sydney Stock Exchange-listed infrastructure fund formerly managed by investment bank Babcock & Brown.

The deal also infused much-needed equity into the highly-geared assets, which had their distributions reduced under the weight of the debt Babcock & Brown Infrastructure had placed on its portfolio.

Despite the fact the acquisitions only sat on Brookfield’s books for the final six weeks of 2009, the Babcock assets nearly doubled Brookfield’s quarterly earnings, which totaled $20.5 million, versus $11.3 million for the same quarter in 2008.

The firm reports its earnings as adjusted net operating income – an accounting measure Brookfield considers a good proxy for its cash earnings.

Overall adjusted net operating income for the firm totaled $117.4 million for 2009, versus $59.7 million in 2008.

To meet its goal of growing dividends in the future, Brookfield said it would seek to pay out between 60 percent and 70 percent of its normalised adjusted net operating income to investors each year.