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Motley Fool: Infrastructure investing

Brookfield Infrastructure Partners’ assets include cell towers, electricity transmission lines, natural gas pipelines, ports, railroads and toll roads – the kinds of properties that provide steady revenue month in and month out. (Courtesy Brookfield Infrastructure Partners)
Brookfield Infrastructure Partners’ assets include cell towers, electricity transmission lines, natural gas pipelines, ports, railroads and toll roads – the kinds of properties that provide steady revenue month in and month out. (Courtesy Brookfield Infrastructure Partners)

Brookfield Infrastructure Partners (NYSE: BIP), as its name implies, focuses on infrastructure assets. These assets include cell towers, electricity transmission lines, natural gas pipelines, ports, railroads and toll roads – the kinds of properties that provide steady revenue month in and month out. Brookfield uses about 65% of that income to pay an above-average dividend that recently yielded 4.2%. (Brookfield is also structured as a limited partnership, which means its tax treatment is different from and a bit more complicated than common stocks.)

In the decade or so since its formation, Brookfield has grown its cash flow per share at an 18% compound annual rate, enabling it to increase its dividend at an 11% yearly pace over that period. Brookfield has enough expansion projects and other growth initiatives under way to increase its payout by 5% to 9% annually over the next five years, making it an excellent option for yield-seeking investors.

That’s because Brookfield’s businesses deliver consistent and predictable income in just about any economic environment. They’re critical to modern life, and are going to be even more in demand as the global urban middle class expands.

Brookfield’s shares may not be screaming bargains right now, but they seem priced to reward patient long-term investors. (The Motley Fool has recommended Brookfield Infrastructure Partners.)

Ask the Fool

Q: What’s the best all-around stock? – L.D., online

A: There’s no single perfect stock, and if you’re going to invest in individual stocks, you’ll need to invest in more than one, anyway. Otherwise, you’ll have too many eggs in one basket – and even the sturdiest baskets can tip over. Remember that it used to be unthinkable that companies such as Sears, General Motors, Eastman Kodak and Texaco would ever go bankrupt.

That said, many companies make better investments than others, and blue chips in particular are well worth considering. A “blue chip” company is one that’s established and relatively stable, with a solid track record – and, very often, a dividend that’s increased regularly. Examples include Berkshire Hathaway, Johnson & Johnson, Microsoft, Nike, Walt Disney, Starbucks and the Home Depot.

There’s a strong argument that the best all-around investment for long-term investors is simply a low-fee broad-market index fund, as it will spread your money across gobs of blue chips and other stocks.

Q: If I invest in stocks via dividend reinvestment plans (“Drips”) or direct investing plans, do I need to keep all the paperwork? – S.W., Bremerton, Washington

A: Yup. Those plans can be great, letting you bypass brokerages and invest in companies directly, but you’ll need to keep good records – of your purchases, sales and reinvested dividends – for tax purposes.

It can be worth it, though: You can avoid brokerage commission costs when buying shares, invest small amounts at a time and have your dividends reinvested in additional stock; over time, that can turn into large sums.

Learn more about these investment plans at DirectInvesting.com, and read our “Complete Guide to Drip Investing” by searching for the term “Motley Fool drips” on Google.

My dumbest investment

My dumbest investment was investing in Helios and Matheson Analytics, the company behind MoviePass.

Another dumb move was buying Novavax at around $2.30 per share (before a reverse split that boosted its price) and then doubling down after its failed clinical trial. – P.D., online

The Fool responds: Ouch. MoviePass presented a problematic business model, essentially giving away more than it took in when it offered subscribers the ability to see unlimited movies in theaters for $9.95 per month. The company, meanwhile, was paying retail prices for those seats its subscribers were filling. The nail in the coffin was when movie theater owners such as AMC launched rival, and more profitable, services.

Vaccine developer Novavax is another story, and a volatile one. Your first red flag was its share price: Stocks trading for less than about $5 per share are penny stocks. They may look like bargains, but they’re often on shaky ground, more likely to head south than north. Reverse splits are another red flag, as their primary purpose is to increase a stock’s price (while reducing the number of shares outstanding, proportionately), and they’re typically executed by struggling companies.

In Novavax’s case, its shares had traded below $1 per share for 30 consecutive days, and the Nasdaq Stock Market warned that it would be delisted if it didn’t get its price back up above $1. The reverse split achieved that. (The stock was recently trading near $6.75.)

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