BIPC: Boost Your Yield And Capture A 27% Premium By Swapping Shares For Units
Published Oct 28, 2020 on Seeking Alpha

Seeking AlphaLong IdeasBIPC: Boost Your Yield And Capture A 27% Premium By Swapping Shares For UnitsOct. 28, 2020 12:09 AM ET|| About: Brookfield Infrastructure Partners L.P. (BIP), BIPC, Includes: BAM, BAMGF, BAMKF, BINFF, BIPAF, BKFPFby: Steven BroderickSteven Broderick Value, Dividend Investing, long-term horizonSummaryEconomically equivalent shares of BIPC are trading at a 27% premium to units of BIP.
The current mispricing of BIPC creates a one-time, one-way opportunity for owners of BIPC to sell their shares in favour of BIP units.
Unitholders of BIP can earn a 4.14% yield versus the 3.47% yield offered by BIPC.
The Opportunity
Brookfield Infrastructure Corporation (BIPC) is an economically identical entity to Brookfield Infrastructure Partners L.P (BIP). The two symbols are essentially two different ways to own the same company. BIPC and BIP offer an equivalent quarterly payout as a dividend and distribution respectively. For investors holding shares of BIPC received from the split earlier this year, the current price disparity between BIPC and BIP presents an opportunity to sell BIPC at a premium and reinvest the proceeds in a greater number of BIP units. This simple trade allows owners of BIP to capture a 27% price premium and enhance their distribution yield on those units from 3.47% to 4.14%.

(Source: Author)
Background
In March 2020, Brookfield Infrastructure Corporation was created through a unit split transaction with investors of Brookfield Infrastructure Partners L.P. In my analysis "One More Reason For Investors to Love Brookfield Infrastructure Partners," I looked at the advantages of holding Brookfield Infrastructure through the new corporate structure over the original limited partnership structure. For many investors, a corporate structure allows for qualified or eligible dividends and simplified taxation.

(Source: SEC Filings)
Brookfield Infrastructure completed this transaction with the goal of broadening... Read more