This week’s Stock of the Week is an infrastructure-management company that stands to gain with the growth of infrastructure projects.
Macquarie Infrastructure Corporation (MIC) is the world’s largest infrastructure manager. It is well-diversified within that sector and stands to gain from the growth of private-sector services through its four business segments.
Its biggest segment, International-Matex Tank Terminals, generates most of the firm’s free cash by providing bulk liquid storage and handling for petroleum products and renewable fuels, chemicals and agricultural oils at 10 US and two Canadian marine terminals. Macquarie’s second-biggest segment is Atlantic Aviation, which does fueling, de-icing, aircraft parking, catering and other services for civilian, government and military aircraft. The Contracted Power segment has interests in six solar-power and two wind-power generating facilities, and the MIC Hawaii segment distributes natural gas and petroleum gas in the Hawaiian Islands.
Macquarie’s revenue is growing steadily, from $1.65 billion in 2016 to a likely $1.75 billion for 2017 and $1.8 billion in 2018. Earnings can be volatile because of the firm’s involvement in the energy sector. But it is the company’s exceptional free cash flow—aided by a carried-forward, tax-limiting loss provision from earlier years—that makes possible the super-high dividend. Cash flow was $6.30/share in 2016 and likely will be reported as $6.60/share for 2017 and $7.50/share for 2018. This allows a dividend payout of $5.68/share/yr., currently yielding 8.8% and likely to be sustainable at least through 2019.
Fiscal year: December. Earnings per share: 2018 est./$2.40…2017 est./$1.80…2016/$1.94.
Geoff K. Dancey, CFA, is president and portfolio manager, Cutler Capital Management, Worcester, Massachusetts, which manages $300 million. CutlerCapital.com