A Surprise Infrastructure Buy, Falling hard

By Travis Johnson, Stock Gumshoe, November 10, 2008

Well, much to my surprise I just picked up a tiny packet of shares in Macquarie Infrastructure Company (MIC), and after my purchase it’s continuing to fall like a stone.

This was an order I placed several weeks ago as a lowball dangler and forgot about, and I didn’t really expect to end up owning the shares, so I’m of two minds about it — the reason the shares have collapsed (and triggered my order) in the last two days is that they dramatically cut the dividend (they cut from 64 cents to 20 cents).  They cut the dividend in order to build up cash reserves, which sounds prudent — this is a highly leveraged company against a portfolio of large and stable assets, and if it’s tough to get credit in the year to come it would be helpful to conserve more cash instead of paying out such an extraordinarily high dividend (it had been close to 30%, it will now be about 13% thanks to the dropping share price).

Now that I have a very small position in these shares, I’ll spend a bit more time seeing if it’s worth adding on to that — or if there’s any reason for real concern.  This is an infrastructure holding company, but it’s not the currently sexy kind of infrastructure (power grid, toll roads, bridges — I guess “sexy” is perhaps an exaggeration).  MIC essentially owns gas storage and distribution facilities and concessions for airport services and parking, so the airport business, in particular, may well be fairly cyclical.  I’ll let you know if I have any bursts of wisdom regarding their future, but my initial thinking was that over the long haul, their assets should appreciate in value and their ability to generate cash should continue to be solid.

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