Brookfield Infrastructure Partners (NYSE:BIP) and Kinder Morgan (NYSE:KMI) sport yields of roughly 4.7% and 4.9%, respectively. They both own assets that fall into the broad infrastructure category and use about the same amount of leverage (debt to EBITDA for each is around 5.5 times). Some investors would simply choose the higher yield at this point, but that would be a mistake. Here's what you need to know to make a better decision.

1. The core businesses

Kinder Morgan is one of the largest midstream companies in North America. It owns oil and gas transportation assets, processing facilities, and storage across Canada, the U.S., and even down into Mexico. Without question, it is one of a handful of giants in the region and can compete for even the largest midstream projects.

A man writing the word "dividends" on a clear board.

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Brookfield Infrastructure Partners is part of the Brookfield Asset Management family. Although it is roughly a quarter the size of Kinder Morgan, its parent is every bit as large as Kinder Morgan, allowing Brookfield Infrastructure Partners to compete competently with larger companies. Brookfield Infrastructure Partners is increasingly investing in midstream assets, too. However, this infrastructure niche only represents about 20% of the partnership's funds from operations (FFO).

The rest of Brookfield's portfolio is spread across the utility (electric production), transportation (trains and toll roads), and data infrastructure (data centers) spaces. In other words, its portfolio of assets is vastly more diversified than Kinder Morgan's. That extends to the location of these assets as well, with Brookfield's portfolio reaching around the globe. In fact, only around a quarter of its cash flow is derived from North America. The rest comes from South America (30% of cash flow), Europe (25%), and Asia Pacific (20%).

At the core, then, Kinder Morgan is a way to play the U.S. midstream space, which has notable growth prospects driven by increasing onshore oil and gas production. Brookfield Infrastructure Partners, meanwhile, is a way to invest in the global infrastructure sector. Neither approach is necessarily better, but the business models are definitely not interchangeable.

2. Another nuance to consider

That's something of a big-picture view, but it isn't where the differences in the approaches of these two companies end. Kinder Morgan basically buys and builds midstream assets and then operates them over the long term to generate cash flow to pay its dividend. It has around $6 billion in projects under development today that will help push cash flow higher over the next year or two.

Brookfield does things a little differently. It tends to look for out-of-favor assets that it can buy at a low cost. It operates the assets to generate cash flow to cover its distribution. However, when the assets it owns increase in value because of capital improvements or simply because investor sentiment has shifted, it will consider selling. It then uses that cash to buy new assets. It takes a much more active approach to its portfolio.

In fact, Brookfield Infrastructure labeled 2018 "a year of asset rotation." It sold one asset for $1.3 billion after owning it for 12 years, generating a 16% internal rate of return. Partially funded by that asset sale, the company bought six businesses for $1.8 billion (roughly 80% of which went into the energy midstream space).

Again, neither approach is inherently better, but they are very different.

3. A little history

So far the biggest differences between these two infrastructure players are focused around the way in which they go about their businesses. These are important considerations for investors to look at, but there's one more nuance to consider here. In 2016, Kinder Morgan cut its dividend. It was the right move for the company, which is again increasing the disbursement, but it was a difficult hit for investors who had come to rely on the dividend. And it was harder to swallow because management was telling investors to expect a dividend increase of as much as 10% in 2016 just a couple of months before the cut was announced. While the company appears to be on a better track today, there's still a lingering trust issue that should worry most investors.

BIP Dividend Per Share (Quarterly) Chart

BIP Dividend Per Share (Quarterly) data by YCharts.

Brookfield Infrastructure Partners, meanwhile, has a stated objective of increasing its distribution annually by 5% to 9%. Its distribution has been upped in each year of its existence, leading to a 12-year streak of annual increases. As for the target percentage increase, over the past decade, it has bested that figure, with a 12% annualized rate of increase. That said, the most recent increase was within the stated range. However, the big takeaway is that Brookfield has so far lived up to its stated distribution commitment, while Kinder Morgan notably fell short of a stated goal.

The final call

Kinder Morgan is obviously the more appropriate of the two names here if you are looking for a North American-focused midstream investment. That said, based on the dividend cut, most would probably be better off looking at peers like Enterprise Products Partners, which is equally as large and hasn't let income investors down. That said, if what you really want is a diversified infrastructure play, then Brookfield Infrastructure Partners is a great option. And if you are just looking for a high-yield income play and these are the two finalists on your list, then Brookfield's steadily increasing dividend should win the day despite the slightly lower yield it offers.