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. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Stock Analysis

    The 3 Energy Stocks You'll Wish You Bought in 2015

    Learn about the energy sector and the types of companies that operate within the sector. Find out about some of the best-performing energy stocks in 2015.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  5. Unconventional Oil

    A type of petroleum that is produced or obtained through techniques ...
  6. Green collar

    A worker who is employed in an industry in the environmental ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!