Brookfield Infrastructure, a global infrastructure operator, has emerged as a standout dividend stock over the past 15 years. With a consistent track record of increasing dividends at a compound annual growth rate of 9%, the company has also witnessed its funds from operations (FFO) per share grow at an impressive 15% compound annual rate. Bolstered by these strong financials, Brookfield Infrastructure expects to continue its brisk growth trajectory in the coming years.
In a recent letter to investors, CEO Sam Pollock shed light on the global infrastructure investment landscape, stating that approximately $100 trillion will be required over the next 15 years to maintain, upgrade, and build infrastructure worldwide. Pollock highlighted two key factors driving this massive investment supercycle. Firstly, the rapid expansion of digital infrastructure to support artificial intelligence (AI) is expected to create a potential market opportunity of over $8 trillion in the next three to five years. Secondly, as the demand for AI utilization surges, the power demand will also increase significantly, with AI chips requiring up to five times the power of standard chips. This will necessitate the use of lower-carbon energy sources like natural gas and renewables.
Brookfield Infrastructure is uniquely positioned to capitalize on this investment megatrend, given its globally diversified portfolio of utilities, energy midstream, transportation, and data infrastructure assets. Currently, more than 60% of its FFO is derived from businesses that stand to benefit from the digitalization and decarbonization trends. The company’s secured backlog includes data infrastructure projects worth $5.5 billion, including substantial investments in semiconductor fabrication facilities being built by Intel. Additionally, Brookfield Infrastructure is expanding its global data center platform with a $1.2 billion investment. The company is also allocating capital to expand its utilities platform and midstream operations to meet the growing demand for natural gas.
In addition to its visible organic growth drivers, Brookfield Infrastructure aims to generate $2 billion in proceeds from capital recycling activities this year, with a further $5 billion to $6 billion expected over the next two years. These funds will enable the company to seize new investment opportunities with greater long-term growth potential.