For income investors, Brookfield Infrastructure Partners L.P. (NYSE:BIP) and EMERA INC COM NPV (NASDAQOTH:EMRAF) have proven reliable investments -- both for steady payouts and for solid track records of dividend growth. 

But which is a better buy? Unfortunately, it's not a simple question to answer. 

Besides paying steady and growing dividends, Emera and Brookfield Infrastructure are actually two very different businesses that are structured in different ways that can make a huge difference in which one you should own. The reality is that depending on your situation, one might make perfect sense, while the other could actually be a bad stock to buy. Keep reading to learn why that's the case. 

Smiling man standing next to electricity meter on a home.

Image source: Getty Images.

Two similar yet different businesses

While Brookfield Infrastructure and Emera have some similarities, they are also very different. To start, Emera is primarily a regulated energy utility, with operations in fewer than 10 U.S. states, three Canadian provinces, and several Caribbean islands, while Brookfield Infrastructure owns regulated and unregulated infrastructure assets in 15 countries on multiple continents, including transportation, telecommunications, utility, energy, and water. 

In other words, Emera is a pure-play energy utility, while Brookfield Infrastructure is a diversified infrastructure business. But while their asset mix is different, they share an important trait: The majority of cash flows for both are from assets that are relatively recession-resistant and should count on steady and growing demand with minimal risk of competitive disruption in the near term. 

Both also have solid management, which has done exceptionally well at allocating capital in the past. And if they continue to execute into the future, the prospects are solid for investors. Emera's management expects to grow its dividend 8% per year on average through 2020, while Brookfield Infrastructure's corporate target is for 5%-9% annual distribution growth for the long term. 

Which is a cheaper buy today?

If we are looking just at GAAP earnings, Emera would appear to be significantly cheaper: 

EMRAF PE Ratio (TTM) Chart

EMRAF PE Ratio (TTM) data by YCharts.

Not so fast. Because of the difference in their asset mix and corporate structure, investors should use different metrics to value each stock.

Emera is a corporation, while Brookfield Infrastructure is a master limited partnership, or MLP, a kind of business structure that makes it more tax-efficient since it doesn't pay corporate taxes directly (but passes that obligation on to its investors, which we will discuss later). For this reason, in addition to its asset mix, it's generally better to price Brookfield Infrastructure by FFO, or funds from operations, versus GAAP earnings. 

So by this more appropriate measure, Brookfield Infrastructure trades for 9.8 times its trailing funds from operations. On the surface that might make it sound far cheaper than Emera, but you can't really compare the P/E ratio for one company with the price to FFO for another. A better comparison is to look at how Brookfield Infrastructure's current valuation compares to its historical valuation. At the beginning of the year, it traded for 8.3 times FFO and has generally traded closer to 8 to 9 times FFO over the past few years. 

In other words, Brookfield Infrastructure is a little more "expensive" right now than it has historically been. But not without good reason. After all, it has consistently been able to grow its cash flows and steadily increase its distribution. 

As to Emera, its current P/E ratio of 28.4 is quite expensive and well above the range even a high-quality utility might normally trade for. It's also more expensive than the average S&P 500 company trades for today at around 25 times trailing earnings. As a matter of fact, Emera's stock price has increased sharply since the start of 2016, with almost all of that price gain the result of multiple expansions. To put it another way, the market has bid up its stock price, but Emera's earnings per share have actually declined over the past year:

EMRAF Chart

EMRAF data by YCharts.

In summary, both Emera and Brookfield Infrastructure are trading at premiums to their historical valuations, but for different reasons. Emera's stock price is up because of expectations that its earnings are set to increase following recent acquisitions and growth investments, while Brookfield Infrastructure's is up because it has proven to be a high-quality business that has steadily delivered cash flow growth. 

Which is a better buy?

Brookfield Infrastructure is the higher-quality investment and probably a better value, even though they're both on the "expensive" side at recent prices and cash flow/earnings. Brookfield Infrastructure also pays a higher dividend, yielding 3.9% at recent prices compared to 3.1% for Emera, with potentially better long-term dividend growth prospects. 

Furthermore, Emera is heavily exposed to energy, particularly fossil fuels, and I'm growing more and more concerned that renewables are going to be far more disruptive -- and far sooner -- than energy companies and energy utilities are expecting. Brookfield Infrastructure, on the other hand, is reducing its exposure to fossil fuels, and investing heavily in telecommunications, water, and other high-growth, economically critical infrastructure assets around the world. To me, this means reduced downside risk of disruption and better upside prospects, too. 

But there's an important consideration for U.S. investors. If you're investing in a retirement account such as a 401(k), IRA (either Roth or traditional), or a 529 or Coverdell college savings account, you might end up paying taxes if you invest in Brookfield Infrastructure because of something called UBTI. For this reason, Brookfield Infrastructure is best owned in a taxable brokerage account. 

Jason Hall owns shares of Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.