Infrastructure service provider
Macquarie Infrastructure Company LLC
) recently hiked its quarterly dividend by 4.3% to 91.25 cents
per share or $3.65 on an annualized basis. The increased dividend
for fourth quarter 2013 is payable in cash on Mar 6, 2014 to
shareholders of record on Mar 3.
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A steady dividend payout is part of the long-term strategy of
Macquarie to provide attractive risk-adjusted returns to its
stockholders. In addition, decent dividend increases at periodic
intervals have been one of its most attractive features. Based on
the closing price of $58.40 on Feb 19, the increased dividend
affirms a healthy yield of 6.25%.
The strategic decision to augment the dividend payout comes on
the heels of better-than-expected fourth quarter and full year
2013 results, wherein proportionately combined free cash flow
rose 12.2% and 25.4%, respectively. Macquarie defines
proportionately combined free cash flow as the sum of the free
cash flow and investments in proportion to its equity interest in
each holding company costs. It is regarded as one of the key
metrics to gauge the performance of the company and an accurate
representation of its cash and liquidity position.
The solid quarterly performance is primarily attributable to
improvement in operations at the Atlantic Aviation segment of
Macquarie, which owns and operates a network of fixed base
operations (FBOs) at 63 airports in the U.S. Macquarie also
acquired a portfolio of five additional facilities in December
last year. The acquisitions are expected to close at the end of
the first quarter of 2014.
With the acquisitions, Atlantic Aviation has established its
footprint in Florida - the largest general aviation market in the
U.S. - with approximately 11.8% of all flight movements based on
data compiled by the FAA (Federal Aviation Administration).
Consequently, Macquarie has been able to transform itself from
virtually a zero presence in Florida to being the second largest
FBO operator in the region. In addition to physical exposure, the
acquisitions will also increase Atlantic Aviation's weighted
average lease life from 19.0 years at Dec 31, 2012 to 19.6 years
at the closing of the transactions.
Macquarie anticipates the growth momentum to continue in 2014 and
expects to generate a significant proportionately combined free
cash flow to further increase its dividend in the ongoing year.
Macquarie presently has a Zacks Rank #3 (Hold). Better-ranked
stocks in the industry include
Hutchison Whampoa Ltd
), each of which carry a Zacks Rank #2 (Buy).