MIDAS SHARE TIPS UPDATE: New roads and bridges lead to a stream of dividends at BBGI Global Infrastructure
The war in Ukraine rages on, inflation is rocketing and stock markets are nervous. But investors still need to put their money somewhere, even if the future looks gloomy. Adventurers can always find a home for their cash, but nervous savers are undoubtedly scanning the market for stocks that are solid, income-paying and even a little bit boring.
BBGI Global Infrastructure neatly fits the bill. 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 more in North America, Australia and Europe.
When BBGI floated ten years ago, there were 19 assets and the company was valued at just over £200million. Today, there are 55 and a stock market valuation of £1.2billion. Reassuringly too, contracts are inflation-linked and run for decades, delivering stable, long-term returns for shareholders.
Large portfolio: BBGI Global Infrastructure invests in essential infrastructure, such as roads, schools, hospitals and prisons, and assets include the Mersey Gateway Bridge (pictured)
Such is the predictability of the business that bosses Duncan Ball and Frank Schramm can forecast dividend payments three years into the future. Announcing a 7.3p dividend with 2021 results last month, they said BBGI is 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 4.3 per cent dividend yield.
Ball and Schramm have also amassed a pipeline of new deals so they can continue to increase the size of the group and the income it generates. Last year alone, BBGI acquired a number of new assets, an affordable housing and recreational centre in Poplar, East London; the Ayrshire and Arran Hospital in Scotland; 15 new fire stations in Merseyside, Lancashire and Cumbria and a section of road on the outskirts of Aberdeen.
The group also agreed to buy a hospital in Canada and recently bought a power station in Canada too. Ball and Schramm are acutely aware, however, that all their acquisitions need to fit BBGI’s investment criteria. Contracts need to be long-dated, the assets need to be essential to everyday life and revenues come from governments or government-backed organisations.
This focus has delivered strong results in BBGI’s first decade as a public company and should continue to do so. Demand for better transport, healthcare, 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 a neat solution, acquiring assets for the long-term and, in effect, leasing them to the Government, while generating solid returns for shareholders.
There is a green angle too, as BBGI works hard to make its assets more environmentally friendly and several assets are in the public transport sector.
Midas verdict: Midas recommended BBGI just over a year ago, when the shares were £1.66. They have risen nearly 5 per cent since then and provided investors with a handsome 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 Ticker: BBGI Contact: bb-gi.com or 00 352 2634791