Investors haven’t had much to get excited about this year. The major stock market indexes are all down. Rising interest rates have fueled worries about a potential recession.
Some investors, though, found a reason for at least a little enthusiasm with a few prominent companies conducting stock splits. Amazon (AMZN 2.66%), for example, conducted a 20-for-1 stock split in June. Tesla (TSLA 3.60%) followed up with a 3-for-1 stock split in August.
Neither of those stock splits served as impressive catalysts for the respective stocks. Investors who are wary about the broader market would understandably be reluctant to dip their toes in the water. But here’s one stock that recently conducted a stock split that risk-averse investors should love. And it’s not Amazon or Tesla.
In with infrastructure
Brookfield Infrastructure (BIP 1.25%) (BIPC 0.85%) isn’t a household name like Amazon and Tesla. One reason why is that it’s much smaller than these two companies, with a market cap in the ballpark of $30 billion. Another factor, though, is Brookfield Infrastructure’s underlying business.
Infrastructure isn’t as sexy as online shopping and electric vehicles. Most people don’t give a second thought to the pipelines that transported the natural gas used to fuel their heaters and kitchen appliances or the transmission lines that bring electricity into their homes. While infrastructure doesn’t get much attention, though, it’s critically important.
Brookfield Infrastructure boasts an impressive array of infrastructure assets. The company operates 16,200 kilometers of natural gas pipelines and owns 65,800 kilometers of electricity distribution and transmission lines. Add to that 32,300 kilometers of rail operations, 3,800 kilometers of toll roads, and 15,000 kilometers of natural gas transmission pipelines.
And there’s more. Brookfield Infrastructure also has 1.5 million installed smart meters for measuring energy use. It operates 11 transportation terminals and 17 natural gas and natural gas liquids processing plants. The company continues to expand further into data, as well. It currently owns 164,700 operational telecom towers and rooftop sites, 22,000 kilometers of fiber optic cable, and 52 data centers.
Relatively low risk
It’s not surprising that relatively few investors paid attention to Brookfield Infrastructure’s 3-for-2 stock split in June. However, many risk-averse investors should find plenty to like about Brookfield Infrastructure.
The company’s infrastructure assets generate steady, recurring revenue. While Amazon and Tesla could be negatively impacted by inflation, around 70% of Brookfield Infrastructure’s cash flow is indexed to inflation. Competition isn’t nearly as much of an issue for Brookfield Infrastructure as it is for Amazon and Tesla, either.
Arguably the most important factor that reduces the risk for Brookfield Infrastructure is its diversification. The company is diversified across multiple types of assets, with no single type accounting for more than 30% of funds from operations (FFO). It’s also spread out geographically, with operations in North America, South America, Europe, and Asia Pacific.
Brookfield Infrastructure’s financial track record looks great. The company’s revenue has increased by a 13% compound annual growth rate (CAGR) since 2017. It has a strong financial position with a BBB+ bond rating, which means that the current expectations of default risk are low.
Another big plus
Over the past 10 years, Brookfield Infrastructure stock has nearly tripled in price. However, its total return during the period tops 380%. The difference is due to another big plus for the stock — its dividend distribution.
Brookfield Infrastructure’s distribution yield has hovered close to or above 3% throughout much of 2022. The company has increased its distribution by a compound annual growth rate (CAGR) of roughly 10% since 2009. It expects to boost the distribution, on average, by between 5% and 9% each year.
Sure, growth-oriented investors will likely be more attracted to stocks such as Amazon and Tesla. However, Brookfield Infrastructure should have solid growth prospects of its own as it sells lower-yielding assets and invests in more profitable ventures. For risk-averse investors, this stock should be worthy of consideration even if it hadn’t recently conducted a stock split.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.