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Macquarie Infrastructure shares nosedive after cutting 2018 dividend

Macquarie Infrastructure Corp. shares were trading nearly 40% lower midday Feb. 22 following the company's decision to pare down its 2018 dividend.

Macquarie Infrastructure shares were hovering around $38.90 at 1:00 p.m. ET, after opening at $44.70.

"[W]e have made the decision to reduce our 2018 dividend in favor of internally funding the repurposing of the assets at International-Matex Tank Terminals and to take advantage of the incentives to invest in growth projects that are a part of recent tax reform," Macquarie Infrastructure CEO Christopher Frost said in a news release. The company expects to distribute a dividend of $1.00 per share, per quarter, in 2018.

Macquarie Infrastructure announced a cash dividend of $1.44 per share for the fourth quarter of 2017, payable March 8 to shareholders of record as of March 5. The fourth-quarter dividend raises the total cash distribution of the company to $5.56 per share in 2017, compared to $5.05 per share in 2016.

Frost said the company is weighing strategic options available for its smaller businesses and is looking to monetize a portion of the roughly 500-MW Bayonne Energy Center Macquarie Infrastructure acquired the gas-fired facility located in New Jersey from an affiliate of ArcLight Capital Partners LLC in 2015.

"To address changing demand drivers for certain liquid products, as we have in the past, we intend to repurpose certain of the assets of our bulk liquid terminals business as well," he said.

On the earnings front, Macquarie Infrastructure reported fourth-quarter net income of $361.3 million, rising from $71.1 million in the comparable period in 2016, largely thanks to U.S. tax reform. Pretax net income fell to $61.8 million, from $82.0 million in the fourth quarter of 2016, primarily due to higher interest expense in the fourth quarter of 2017.

The company also booked fourth-quarter EBITDA excluding noncash items of $178 million, up from $166 million in the comparable period in 2016. Adjusted free cash flow totaled $135.5 million in the 2017 fourth quarter, up from $118.6 million in fourth-quarter 2016.

Full-year 2017 net income totaled $456.1 million, an increase from $154.9 million in 2016, while pretax net income decreased to $222.0 million, from $226.1 million in 2016. EBITDA excluding noncash items for 2017 rose to $711.9 million, from $695.6 million in 2016, while adjusted free cash flow climbed $568.0 million, from $510.2 million in 2016.

Macquarie Infrastructure expects to generate $690.0 million to $720.0 million of 2018 EBITDA excluding noncash items and expects a decrease of 8% to 10% in 2018 free cash flow compared to 2017.