The stock market goes up and the stock market goes down, but people aren't going to stop buying electricity, using water and natural gas, surfing the internet, or driving their car. And the companies that own the infrastructure that supports all of that will keep collecting the small but regular "tolls" assessed for the use of their assets. It doesn't matter too much what's happening on Wall Street; they are still going to get paid. That's why investors might want to look at the infrastructure space while Wall Street is broadly downbeat during this bear market. Here are three options to consider, each of which is offering a generous yield.
1. The all in one
Diversification is good for your portfolio, and it can be good for a company's portfolio, too, especially if the goal is to create a collection of infrastructure assets. Brookfield Infrastructure Partners(NYSE: BIP), for example, spreads its bets across the globe, with 44% of its funds from operations (FFO) coming from North America, 19% from South America, 18% from Europe, and 19% from Asia. This way the economic ups and down of any one region won't play too much havoc with performance. On the business front, it owns utility, transportation, midstream, and data assets (towers, data centers, and fiber optic cables). All of these are generally reliable businesses and give the company more options when buying and selling assets. And any single asset won't have an undue influence should it experience difficulty. Essentially, Brookfield Infrastructure is a one-stop shop for infrastructure.
Shares yield around 3.8% today and are backed by a distribution that has been increased annually since 2008, adjusted for a special distribution in 2020 (the partnership created a traditional corporate share class for those that can't own partnerships, with shares in the entity distributed to then-current unitholders). The distribution has grown at a compound annual rate of 10% since 2009, which is pretty impressive for any company, let alone one that owns boring infrastructure assets. Funds from operations over that span increased by a hefty 15% a year. This infrastructure player has clearly proven it can provide broad exposure and strong growth at the same time, making it a solid option for anyone looking at the space. The best part: Despite the company's consistency, the stock has fallen around 17% from its recent highs thanks to the bear market.
2. Getting clean
Another option in the Brookfield family to consider is Brookfield Renewable Corporation(NYSE: BEPC). As the name implies, this company is focused on clean energy investments, from solar and wind power to energy storage. It currently has 21 gigawatts of power in its portfolio, with another 69 gigawatts in the development pipeline. In other words, it is looking to triple in size, and has the projects lined up to make that happen. The bulk of its generation today, at around 50% of the portfolio, is hydroelectric, which provides a solid foundation for the company's plans to grow in other areas of the clean energy niche.
The stock currently yields around 3.6%. Brookfield Renewable targets annual dividend increases of 5% to 9%. Like Brookfield Infrastructure, there are actually two similar share structures here, the other one being a partnership -- Brookfield Renewable Partners(NYSE: BEP). The partnership has increased its dividend for a decade at a compound annual clip of 6%, adjusted for the Brookfield Renewable Corporation spin off. Given the backlog of new projects in the pipeline, management expects funds from operations to expand at an annualized 10% rate through 2026. If you want to focus on clean energy, this is a strong option, and it's down nearly 16% from its highs roughly a year ago.
3. Fully regulated
Dominion Energy(NYSE: D) is the last name on my list today. Having sold off parts of its business over the past decade, it's largely a regulated utility offering electric and natural gas services to 7 million customers across 13 states. Being regulated, it is granted monopolies in the regions it serves, but has to get its rates and investment plans approved by the government. Growth tends to be slow and steady over time, and generally takes place no matter what's going on in the world. That's because regulators are more focused on ensuring reliable access to electricity and natural gas than they are to the ups and downs of Wall Street.
Dominion cut its dividend in 2020 after selling a pipeline business to Berkshire Hathaway. That simplified Dominion's business and left it projecting annualized earnings growth of 6.5% over the next five years, with dividends expected to expand at around 6%. Shares are down around 13% from the highs they achieved earlier in 2022. That relatively strong performance compared to the other two names here, and that of the broader market, isn't shocking given the nature of the utility business. However, the company's strong growth prospects, backed by $37 billion in capital investment plans (including a healthy dose of clean energy), is a key part of the story too. If you are looking for a safe way to own infrastructure, Dominion and its regulated business could be a good pick. The yield is currently around 3.3%.
Three ways to play infrastructure
If you want a simple, one-and-done-type infrastructure investment to grab while the market is down, Brookfield Infrastructure Partners is a solid choice. If you prefer to focus on the clean energy side of things, Brookfield Renewable Corporation might work for you. Dominion Energy, meanwhile, is a regulated name that can provide income 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 scooping up if you like reliable dividends.
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Reuben Gregg Brewer has positions in Dominion Energy, Inc. The Motley Fool has positions in 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: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
