Brookfield Infrastructure Current Financial Leverage

BIP Stock  USD 29.98  0.35  1.18%   
Brookfield Infrastructure holds a debt-to-equity ratio of 1.298. At this time, Brookfield Infrastructure's Short and Long Term Debt Total is relatively stable compared to the past year. As of 03/28/2024, Net Debt is likely to grow to about 50 B, while Debt Ratio is likely to drop 0.44. Brookfield Infrastructure's financial risk is the risk to Brookfield Infrastructure stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Brookfield Infrastructure's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Brookfield Infrastructure's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Brookfield Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Brookfield Infrastructure's stakeholders.

Brookfield Infrastructure Quarterly Net Debt

47.6 Billion

For most companies, including Brookfield Infrastructure, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Brookfield Infrastructure Partners the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book
2.1812
Book Value
11.534
Operating Margin
0.26
Profit Margin
0.007
Return On Assets
0.0291
Given that Brookfield Infrastructure's debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Brookfield Infrastructure is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Brookfield Infrastructure to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Brookfield Infrastructure is said to be less leveraged. If creditors hold a majority of Brookfield Infrastructure's assets, the Company is said to be highly leveraged.
At this time, Brookfield Infrastructure's Short and Long Term Debt Total is relatively stable compared to the past year. As of 03/28/2024, Net Debt is likely to grow to about 50 B, while Debt Ratio is likely to drop 0.44.
  
Check out the analysis of Brookfield Infrastructure Fundamentals Over Time.

Brookfield Infrastructure Financial Leverage Rating

Brookfield Infrastructure Partners bond ratings play a critical role in determining how much Brookfield Infrastructure have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Brookfield Infrastructure's borrowing costs.

Brookfield Infrastructure Debt to Cash Allocation

As Brookfield Infrastructure Partners follows its natural business cycle, the capital allocation decisions will not magically go away. Brookfield Infrastructure's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 49.46 B in debt with debt to equity (D/E) ratio of 1.3, which is OK given its current industry classification. Brookfield Infrastructure has a current ratio of 0.75, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Debt can assist Brookfield Infrastructure until it has trouble settling it off, either with new capital or with free cash flow. So, Brookfield Infrastructure's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Brookfield Infrastructure sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Brookfield to invest in growth at high rates of return. When we think about Brookfield Infrastructure's use of debt, we should always consider it together with cash and equity.

Brookfield Infrastructure Total Assets Over Time

Brookfield Infrastructure Assets Financed by Debt

Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Brookfield Infrastructure's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Brookfield Infrastructure, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Brookfield Infrastructure debt ratio should be compared their industry average or other competing firms.

Brookfield Short Long Term Debt Total

Short Long Term Debt Total

51.93 Billion

At this time, Brookfield Infrastructure's Short and Long Term Debt Total is relatively stable compared to the past year.

Understaning Brookfield Infrastructure Use of Financial Leverage

Brookfield Infrastructure financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Brookfield Infrastructure's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Brookfield Infrastructure assets, the company is considered highly leveraged. Understanding the composition and structure of overall Brookfield Infrastructure debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Brookfield Infrastructure's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Brookfield Infrastructure's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for 2024
Short and Long Term Debt Total49.5 B51.9 B
Net Debt47.6 B50 B
Long Term Debt39.9 B41.9 B
Short Term Debt6.4 B6.7 B
Short and Long Term Debt6.1 B6.4 B
Long Term Debt Total34.8 B19.9 B
Long Term Debt To Capitalization 0.86  0.91 
Total Debt To Capitalization 0.88  0.93 
Debt Equity Ratio 7.42  7.04 
Debt Ratio 0.46  0.44 
Cash Flow To Debt Ratio 0.09  0.06 
Please read more on our technical analysis page.

Pair Trading with Brookfield Infrastructure

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Brookfield Infrastructure position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brookfield Infrastructure will appreciate offsetting losses from the drop in the long position's value.

Moving against Brookfield Stock

  0.54BIP-PA Brookfield InfrastructurePairCorr
  0.46BIP-PB Brookfield InfrastructurePairCorr
  0.45D Dominion Energy Financial Report 3rd of May 2024 PairCorr
The ability to find closely correlated positions to Brookfield Infrastructure could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Brookfield Infrastructure when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Brookfield Infrastructure - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Brookfield Infrastructure Partners to buy it.
The correlation of Brookfield Infrastructure is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Brookfield Infrastructure moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Brookfield Infrastructure moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Brookfield Infrastructure can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
When determining whether Brookfield Infrastructure is a good investment, qualitative aspects like company management, corporate governance, and ethical practices play a significant role. A comparison with peer companies also provides context and helps to understand if Brookfield Stock is undervalued or overvalued. This multi-faceted approach, blending both quantitative and qualitative analysis, forms a solid foundation for making an informed investment decision about Brookfield Infrastructure Partners Stock. Highlighted below are key reports to facilitate an investment decision about Brookfield Infrastructure Partners Stock:
Check out the analysis of Brookfield Infrastructure Fundamentals Over Time.
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Is Brookfield Infrastructure's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Brookfield Infrastructure. If investors know Brookfield will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Brookfield Infrastructure listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
(0.44)
Dividend Share
1.53
Earnings Share
0.14
Revenue Per Share
39.031
Quarterly Revenue Growth
0.34
The market value of Brookfield Infrastructure is measured differently than its book value, which is the value of Brookfield that is recorded on the company's balance sheet. Investors also form their own opinion of Brookfield Infrastructure's value that differs from its market value or its book value, called intrinsic value, which is Brookfield Infrastructure's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Brookfield Infrastructure's market value can be influenced by many factors that don't directly affect Brookfield Infrastructure's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Brookfield Infrastructure's value and its price as these two are different measures arrived at by different means. Investors typically determine if Brookfield Infrastructure is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Brookfield Infrastructure's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.