Two Infrastructure ETFs, Two Outcomes

Brookfield focuses on paying dividends to investors. The quarterly dividend has been steady at $0.265 per share, which works out to a 7% yield at current prices. Dividends are paid out of adjusted net operating income (ANOI), which in 2008 was $1.65 per share, easily covering the $1.06 dividend. This year has been more difficult. In the first quarter, ANOI was $0.23, and in the second quarter, $2.01, though $1.80 came from the sale of an investment in Brazil. For now, the vast majority of the ANOI comes from electricity transmission. If timber strengthens, Brookfield would likely be able to cover the dividend without relying on asset sales or dipping into cash reserves.

The Macquarie and Brookfield funds were intended to be different than the PowerShares Emerging Market Infrastructure Fund(PXR) and the iShares Emerging Market Infrastructure Fund(EMIF). The former sought to invest in low-volatility dividend plays, and the latter focused on subsets of the emerging market equity space.

In past articles, I talked about giving new funds time to show what they really do as opposed to what they are supposed to do. It turned out that Macquarie Infrastructure was extremely risky, and Brookfield less so, as its decline was in line with the market. Weathering what is the worst financial crisis since the Great Depression should make prospective investors in Brookfield confident in its viability, even if the prospect of low correlation didn't work out.

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