Monday, December 23, 2024

Why Brookfield and Other Infrastructure Stocks Held Up in Today’s Sell-Off | The Motley Fool

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Infrastructure stocks benefiting from recent trends are holding up better than most stocks today.

With the U.S. stock market caught up in a global sell-off, investors would be best served avoiding panic, and instead checking their stock wish list today. After all, corrections in the market are the best times to add funds for long-term investing.

And some investments are showing why holding them in a portfolio can also help you stay calm and navigate what can be unnerving market moves. Infrastructure stocks including Brookfield Infrastructure Partners (BIP -0.07%) (BIPC -2.38%), Brookfield Renewable Partners (BEP -2.91%) (BEPC -2.35%) and NextEra Energy (NEE -2.50%) are holding their own in today’s market slide. As of 1:05 p.m. ET, Brookfield Infrastructure and Brookfield Renewable stocks were down by just 0.4% and 2%, respectively. That’s after they had plunged by as much as about 6%. Utility and clean energy company NextEra’s stock was lower by 1.6%. That compares to the S&P 500‘s drop of 2.7% at that time.

Brookfield holds critical assets

Today’s drop comes after a strong market run this year. Corrections can be healthy for markets after sharp moves higher. The trigger today seems to be from actions by the Bank of Japan and the related “carry trade” impacts. But the market slump is mainly hitting what were the highest-flying tech stocks.

Companies like Brookfield and NextEra hold critical assets that are benefiting from recent trends that should continue. Brookfield Infrastructure and Brookfield Renewable both released second-quarter earnings late last week. Those reports confirmed that the underlying businesses continue to grow.

Infrastructure reported a 10% increase in funds from operations (FFO), the preferred measure of performance for companies or partnerships that own real estate assets. That growth provides comfort for shareholders that dividend payouts can continue and even increase.

Brookfield’s portfolio of global assets includes transportation as well as utilities, energy transmission and storage, and data transmission. Last year, it also added the world’s largest owner and lessor of intermodal shipping containers to its mix. That acquisition helped its transportation segment lead growth in the second quarter.

Data centers need power

Brookfield Infrastructure also holds data center assets that its sister company helps to power. Brookfield Renewable also reported strong FFO growth of 9% year over year in its second quarter.

Management noted the growing need to supply technology companies with power for “increasingly large requirements given their growing investment in data center development to support cloud and AI [artificial intelligence] technologies.”

With shares down nearly 10% year to date, now be a good time to add a portfolio position like Brookfield Renewable that will help power the ongoing development of data centers needed for increased computing power.

NextEra Energy is also in a position to help power these facilities. It combines traditional utility holdings with growing renewable power supplies. It also recently reported strong quarterly results. NextEra Energy also plans to grow its dividends at a roughly 10% annually over the next two years.

Today’s market moves show that holding at least some of these owners of critical assets can help offset sharp declines in some growth stocks at times of high volatility.

Howard Smith has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, and NextEra Energy. The Motley Fool has positions in and recommends Brookfield Renewable and NextEra Energy. The Motley Fool recommends Brookfield Infrastructure Partners and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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