What is sort of puzzlingly to me is that these reports, about the dividends not being covered, did not reconcile that Brookfield Infrastructure have been not only able to pay their dividend for many years, but also growing it. This would obviously be impossible if their dividend not covered.

True enough. The payouts have obviously been covered somehow. The question is how.

My recollection of the Dalrymple report (apologies for misspelling his name in my previous post) is he's making a case that Brookfield tells a simple story -- revenues from long-term contracts for the use of infrastructure assets fund BIP's payouts, making it a boring, safe, predictable infrastructure operating company -- but the reality is more complicated. It's not just the question of whether wholly-owned assets are generating cash profits. There's also a large chunk of partially-owned assets accounted for with the equity method. BIP can take credit for its share of earnings from those assets, but it's not necessarily cash it can then pay out. It might be earnings retained by those independent entities and held on their balance sheets.

Which would still be fine, aside from the part about Brookfield allegedly attempting to mislead investors. Unfortunately, I lack both the motivation and the accounting chops to do a deep dive on debt, equity and dispositions dating to BIP's spinout in 2008 and including the issuance of shares in the BIPC spinout of 2020. It is too hard for me. Mr. Dalrymple concludes that payouts have exceeded 100% of cash flows from assets since 2015 and have been covered by issuing BIP units, BIPC shares and taking out recourse debt. He makes a case that BIP disclosures have gotten materially worse over the years, making the effort to understand its business more difficult. He also makes the case that because BAM management controls BIP investments and has no fiduciary responsibility to BIP unitholders, it has favored private fund investors over BIP unitholders in certain transactions.

When Alexander Steinberg made inquiries of Brookfield based on Mr. Dalrymple's report, Brookfield did not contest, apparently, the conclusion that dividends from portfolio companies do not cover its cash payouts -- incentive distributions to BN and preferred and unit/share dividends to investors. Instead, the company emphasized its excellent record in asset sales and capital recycling. Mr. Steinberg concluded this makes BIP more like a private equity company than an infrastructure operating company. Which might also be fine, but is a different and higher-risk business model than the boring, contractually-guaranteed revenue streams the company advertises. Mr. Steinberg concluded:

Scant disclosure is a bad sign once BPY comes to memory. Initially, after the spinoff, BPY's statements and supplementaries were possible to understand. Later on, they were becoming less and less transparent. In the end, I was not able to understand anything. Eventually, as we know, BN had to bail out BPY at a rather low price despite regular annual increases in BPY's distributions.

The recent rally suggests Mr. Market is not concerned. For readers who don't want to trudge through Mr. Dalrymple's 79-page report, here's a link to Mr. Steinberg's distillation. Investors can decide for themselves whether the issues raised matter to them:

seekingalpha.com - A short report questions brookfield infrastructure and makes me rethink my position