The stock market goes up and the stock market goes down, but people won’t stop buying electricity, using water and natural gas, surfing the Internet or driving their cars. And companies that own the infrastructure that supports all of this will continue to collect the small but regular “tolls” assessed for the use of their assets. It doesn’t matter what happens on Wall Street; they will still be paid. This is why investors might want to look into the infrastructure space as Wall Street is broadly pessimistic during this bear market. Here are three options to consider, each offering a generous return.
1. All in one
Diversification is good for your portfolio, and it can also be good for a company’s portfolio, especially if the goal is to build a collection of infrastructure assets. Brookfield Infrastructure Partners (BEEP -0.31%), for example, spreads its bets globally, with 44% of its funds from operations (FFO) coming from North America, 19% from South America, 18% from Europe and 19% from Asia. . That way, economic ups and downs in a region won’t hurt performance too much. Commercially, it owns utility, transport, midstream and data (towers, data centers and fiber optic cables) assets. All of these companies are generally reliable and provide the company with more options when buying and selling assets. And no asset will have undue influence if it gets into trouble. Essentially, Brookfield Infrastructure is a one-stop-shop for infrastructure.
The shares yield around 3.8% today and are backed by a distribution that has been increased every year since 2008, adjusted for a special distribution in 2020 (the partnership created a traditional corporate share class for those who don’t may not own partnerships, with shares in the entity distributed to then-current unitholders). Distribution has grown at a compound annual rate of 10% since 2009, which is pretty impressive for any company, let alone one with boring infrastructure assets. Funds from operations over this period increased by 15% per year. This infrastructure player has clearly proven that it can deliver broad exposure and strong growth at the same time, making it a solid option for anyone looking for space. The best part: Despite the company’s consistency, the stock has fallen about 17% from its recent highs thanks to the bear market.
2. Get clean
Another option in the Brookfield family to consider is Brookfield Renewable Energy Company (BEPC 0.90%). As the name suggests, this company focuses on clean energy investments, from solar and wind power to energy storage. It currently has 21 gigawatts of power in its portfolio, with an additional 69 gigawatts under development. In other words, it’s looking to triple in size and has the plans in place to make it happen. Most of its current generation, at around 50% of the portfolio, is hydroelectric, which provides a solid foundation for the company’s growth plans in other areas of the clean energy niche.
The title is currently yielding around 3.6%. Brookfield Renewable is targeting annual dividend increases of 5% to 9%. Like Brookfield Infrastructure, there are actually two similar share structures here, the other being a partnership — Brookfield Renewable Partners (BEP -0.24%). The partnership increased its dividend for a decade to a compound annual clip of 6%, adjusted for the spin-off from Brookfield Renewable Corporation. Given the backlog of new projects underway, management expects operating funds to grow at an annualized rate of 10% through 2026. If you want to focus on clean energy, c It’s a solid option, and it’s down nearly 16% from its highs. about a year ago.
3. Fully Regulated
Dominion Energy (D 1.83%) is the last name on my list today. Having sold part of its business over the past decade, it is largely a regulated utility providing electric and natural gas service to 7 million customers in 13 states. Being regulated, it is granted monopolies in the regions it serves, but must have its tariffs and investment plans approved by the government. Growth tends to be slow and steady over time, and usually takes place no matter what is happening in the world. Indeed, regulators are more focused on ensuring reliable access to electricity and natural gas than on the ups and downs of Wall Street.
Dominion cut its 2020 dividend after selling a pipeline business to Berkshire Hathaway. This simplified Dominion’s business and left it projecting annualized earnings growth of 6.5% over the next five years, with dividends expected to increase by around 6%. The shares are down about 13% from the highs reached earlier in 2022. This relatively strong performance compared to the other two names here, and that of the broader market, is not shocking given the nature public service activity. However, the company’s strong growth prospects, backed by $37 billion in capital investment plans (including a healthy dose of clean energy), are also a key part of the story. If you are looking for a safe way to own infrastructure, Dominion and its regulated business might be a good choice. The yield is currently around 3.3%.
Three Ways to Play Infrastructure
If you want a simple, unique infrastructure investment to grab while the market is down, Brookfield Infrastructure Partners is a solid choice. If you prefer to focus on clean energy, Brookfield Renewable Corporation might be right for you. Dominion Energy, on the other hand, is a regulated name that can generate revenue and dividend growth and operates a little outside the Wall Street sphere. All three are down thanks to the bear market, but might be worth picking up if you like reliable dividends.
Reuben Gregg Brewer holds positions at Dominion Energy, Inc. The Motley Fool holds positions and recommends Berkshire Hathaway (B shares) and Brookfield Renewable Corporation Inc. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Partners and Dominion Energy, Inc .and recommends the following options: January 2023 $200 long calls on Berkshire Hathaway (B shares), January 2023 $200 short calls on Berkshire Hathaway (B shares) and January 2023 $265 short calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.