Positive outlook for listed infrastructure: FSI

26 May 2020

There is no ‘one size fits all’ approach to dividends for listed infrastructure companies, according to First Sentier Investors (FSI), and the lockdown has shown the positive outcomes business and governments can have by working together on infrastructure.

Rebecca Myatt, portfolio manager for global listed infrastructure (GLI), said the firm believed companies that had accepted some form of Government support should not be paying out dividends, but the companies it had invested in did not opt for that support.

“The key deciding factor, in our view, is really the strength of a company’s balance sheet,” Myatt said.

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“Those with weak balance sheets and limited liquidity should not increase debt to pay out a dividend, just because they committed to it before the crisis.

“But companies with strong balance sheets and no liquidity concerns should absolutely pay their dividend.”

The GLI team would now incorporate into its analysis whether infrastructure companies need a social license to operate.

“During COVID-19 we have been reminded which services are essential for society to function at its most basic level,” Myatt said.

“As we have all retreated into our own homes our basic needs have been for the water to be running, electricity and gas to be supplied, and for our WIFI to work so that we can remain connected to the outside world.”

A notable outcome of the lockdown was the strong collaboration between governments and businesses.

“If all parties have worked well together this should only strengthen the relationships a company has with its communities and with the government,” Myatt said

“We also believe that infrastructure can have a role to play in driving economic growth. For example, the European Green Deal could help in stimulating the economy through investment in renewable generation, electrification of transportation and decarbonisation of heating.

“This allows companies to accelerate their investment in renewables, which in turn leads to job creation and economic growth.”

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