MIDAS SHARE TIPS UPDATE: Dividend Flow at BBGI
MIDAS STOCK ADVICE UPDATE: New roads and bridges drive dividend stream at BBGI Global Infrastructure
The war in Ukraine is raging, inflation is skyrocketing and stock markets are jittery. But investors still have to put their money somewhere, even if the future looks bleak. Adventurers can always find a home for their money, but nervous savers no doubt scan the market for stocks that are solid, profitable and even a little boring.
BBGI Global Infrastructure fits the bill perfectly. The company invests in essential infrastructure, such as roads, schools, hospitals and prisons. These assets include the Mersey Gateway Bridge, Gloucestershire Royal Hospital and Belfast Metropolitan College in the UK, as well as many others in North America, Australia and Europe.
When BBGI was launched ten years ago, there were 19 assets and the company was valued at just over £200million. Today there are 55 and a market valuation of £1.2 billion. It is also reassuring that the contracts are indexed to inflation and run for decades, providing stable long-term returns for shareholders.
Extensive portfolio: BBGI Global Infrastructure invests in critical infrastructure, such as roads, schools, hospitals and prisons, and assets include the Mersey Gateway Bridge (pictured)
The company’s predictability is such that bosses Duncan Ball and Frank Schramm can forecast dividend payments three years from now. Announcing a 7.3p dividend with 2021 results last month, they said BBGI was targeting 7.48p for 2022, 7.63p for next year and 7.78p for 2024.
With the shares at £1.73, that puts the stock on a robust dividend yield of 4.3%.
Ball and Schramm have also amassed a pipeline of new deals so they can continue to grow the size of the group and the revenue it generates. Last year alone BBGI acquired a number of new assets, affordable housing and a leisure center in Poplar, east London; Ayrshire and Arran Hospital in Scotland; 15 new fire stations in Merseyside, Lancashire and Cumbria and a stretch of road on the outskirts of Aberdeen.
The group has also agreed to buy a hospital in Canada and recently bought a power plant in Canada as well. Ball and Schramm are however fully aware that all of their acquisitions must meet BBGI’s investment criteria. Contracts must be long-term, assets must be essential to daily life, and revenues must come from governments or government-supported organizations.
This focus has produced strong results during BBGI’s first decade as a public company and should continue to do so. The demand for better transportation, health care, housing and education is growing, not just here, but internationally. At the same time, cash-strapped governments are looking for ways to use private sector funds to their advantage.
BBGI offers an attractive solution, acquiring long-term assets and, in effect, leasing them to the government, while generating strong returns for shareholders.
There is also a green angle, as BBGI is working hard to make its assets more environmentally friendly and several assets are in the public transportation sector.
Midas verdict: Midas recommended BBGI just over a year ago when shares were at £1.66. They’ve risen almost 5% since then and provided investors with a nice dividend along the way. In an uncertain world, existing investors should stick with this stock. At £1.73, newcomers could also buy a few shares and lock them away for a rainy day.
Traded on: main market Teleprinter: BBGI Contact: bb-gi.com or 00 352 2634791