Savvy investors know to love those toll-booth companies out there--companies that own hard-to-replicate assets that produce quality cash flow streams and require little short-term strategic support. These companies can take many forms, from timberland owners like Weyerhaeuser (NYSE:WY) to petroleum transport and storage companies like Enbridge Energy Partners (NYSE:EEP) to diversified investment holding companies like Brookfield Infrastructure (NYSE:BIP).

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Macquarie Infrastructure Company LLC (NYSE:MIC) is a company worth exploring within that same theme. While there are cyclical and long-term structural issues with some of the company's operating assets, results have been getting better and the company's dividend paying ability seems to be getting stronger.

Four Very Different Businesses
MIC operates four different business units, with two of them compromising nearly 90% of the company's EBITDA.

The smaller businesses are The Gas Company (TGC) and District Energy. TGC not only operates the largest liquefied petroleum gas distribution business in Hawaii, but also the only utility gas pipeline business across the state. District Energy (which MIC holds just more than 50% of) is in the business of providing chilled water to run building cooling systems in Chicago and Las Vegas.

Second in importance is Atlantic Aviation - the largest airport services provider to business and private jets in the United States. Atlantic operates at over 60 airports, providing refueling, terminal and hanger services to private jets.

Last and not least, MIC owns 50% of International-Matex Tank Terminals - a petroleum storage company with operations at 10 marine terminals, including New York Harbor.

Will the Good Days of Private Aviation Ever Come Back?
Not surprisingly, MIC's Atlantic Aviation business saw a sharp decline in business during the recession. Unfortunately, while conditions have certainly improved, it's unclear whether this is really going to be the kind of business it once was. Private aircraft builders like General Dynamics (NYSE:GD) and Bombardier (OTCBB:BDRBF) are seeing better trends in their business, but shareholder activities have put a huge amount of scrutiny on the use of private aircraft, and even operators like Berkshire Hathaway's (NYSE:BRK.A) NetJets have continued to struggle.

SEE: The Biggest Corporate Image Catastrophes

IMTT Should be a Cash Cow
There's little question that IMTT (the storage business) is the crown jewel at MIC. Yes, the airport service business may get better, but the petroleum storage business is already doing well and market conditions suggest multiple years of strong cash production. While companies like Kinder Morgan (NYSE:KMP) and Cheniere Energy Partners (AMEX:CQP) are looking to add capacity, most available storage is booked up and rates are rising. What's more, there is only so much deepwater-accessible real estate out there for competing terminals and facilities.

The Bottom Line
While MIC may look overburdened with debt, investors should look a little closer and recognize that meaningful amounts of MIC's debts are non-recourse. That doesn't mean that the company is free to throw around cash and acquire more assets, but the company's liquidity situation is better than it may seem at first glance.

Considering the long-run, I think MIC management probably does need to consider changing up its asset base and keeping its eyes open with respect to new capital allocation opportunities. That may be particularly true in a low interest rate environment like today.

I don't necessarily love MIC's asset base, and I would personally prefer other investment options like Brookfield Asset Management (NYSE:BAM), Brookfield Infrastructure, as well as various foreign holding companies and pure-play partnerships like Energy Transfer Equity (NYSE:ETE). That said, MIC is not overpriced today, there is the potential of an improving aircraft services market, and the company should be in position to improve its dividend payout over the next couple of years.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center