The perfect split action for this wild market (hint: it’s not Amazon or Tesla)

If there was an investor version of Paul Revere today, he might go around proclaiming, “Stock splits are coming!” Several large companies are set to carry out stock splits soon.

Amazon (AMZN 3.66%) Shareholders recently voted in favor of a 20-for-1 stock split scheduled for June 3, 2022. Tesla (TSLA) 7.33%) has announced its intention to carry out a stock split this year. However, the details of the plan have not been revealed. The shareholders must approve the division.

These are just two examples of the wave of stock splits to come. But there is one stock with an upcoming split that is perfect for this market. And it’s not Amazon or Tesla.

Electricity transmission lines with two workers shown in silhouette.

Image source: Getty Images.

flying under the radar

Unlike Amazon and Tesla, Brookfield Infrastructure (GDP 0.48%) (BIPC -0.96%) it is not a family name. The company’s market capitalization is only a fraction of that of those two giants. However, there is a strong possibility that your life could be unknowingly affected by Brookfield Infrastructure.

The company ranks as one of the largest operators of infrastructure assets in the world. Brookfield Infrastructure’s portfolio includes communication towers, data centers, power transmission lines, fiber optic cable, natural gas pipelines, natural gas storage facilities, natural gas processing plants, railways, toll roads and plus.

You can invest in Brookfield Infrastructure in two different ways. The company was first organized as a limited company (LP) with shares trading under the symbol BIP (Brookfield Infrastructure Partners). However, to attract more investors who might be reluctant to buy LP shares, the company formed Brookfield Infrastructure Corporation in 2019, with the shares trading under the ticker BIPC.

BIP and BIPC have the same underlying business. Both stocks are scheduled to do a 3-for-2 stock split on June 10, just days after Amazon’s stock split.

Ideal for moments like these

Many stocks are taking a hit with the overall market in decline. However, Brookfield Infrastructure is holding up quite well and is, in fact, up to date.

While inflation is a major concern for many companies, Brookfield Infrastructure is largely insulated from the negative effects. Approximately 70% of its funds from operations (FFO) benefit from contracted or regulated inflation adjustments.

Higher oil and gas prices may even help Brookfield Infrastructure. The company stated in a recent investor presentation that “the current pricing environment should have a positive impact on the 20% of our market-sensitive revenue in our middle sector.”

But Brookfield Infrastructure is almost certain to succeed even if inflation and energy prices fall a bit. A global infrastructure supercycle is underway. Swiss Re projects that $80 billion will need to be invested by 2040 to upgrade infrastructure around the world. This creates many opportunities for Brookfield Infrastructure.

paying

There’s also another big reason why investors like Brookfield Infrastructure so much right now: their distributions. BIP’s dividend yield exceeds 3.5%. BIPC pays the same distribution, but its yield of 2.85% is less than BIP due to the difference in share prices.

Brookfield Infrastructure has increased its deliveries at a compound annual growth rate of about 10% since 2009. The company expects to grow its deliveries by 5-9% per year in the long term.

Those distributions make a significant difference to investors. In the last 10 years, BIP’s stock has nearly tripled. However, its total return, including dividend reinvestment, is close to 360%, outperforming the return of the S&P 500.

Brookfield Infrastructure may not offer the long-term returns that Amazon and Tesla have in the past. However, it is poised to continue rewarding investors with growth and dividends. You will be hard pressed to find a better stock with a split down the road that is better suited to today’s wild market.

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