Brookfield Asset Management (BN 0.34%) has done a tremendous job creating value for investors over the years. Not only has it enriched its shareholders, but it has grown the wealth of investors in its private funds and publicly traded affiliates. That's true of its infrastructure partnership, Brookfield Infrastructure Partners (BIP -0.52%), which has significantly outperformed the market since its formation.

While both of those companies appear poised to continue enriching investors in the years to come, most probably don't want to own two related companies in their portfolio. Here's a look at which one is the better buy between these two.

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Brookfield vs. Brookfield: How they make money

Brookfield Asset Management and Brookfield Infrastructure Partners have two very different business models. Brookfield Asset Management has two main sources of income: 

  • Asset management: It earns base management fees on the funds and publicly traded partnerships it manages, including Brookfield Infrastructure. It also generates performance-based income on many of its private equity funds.
  • Investing capital: Brookfield has "skin in the game by investing money into the funds it manages as well as holding sizable equity stakes in its four publicly traded affiliates (infrastructure, renewable energy, real estate, and private equity). These investments generate dividend income as well as capital appreciation.

Those businesses currently produce about $2.5 billion in free cash flow per year, which Brookfield can distribute to its investors via its dividend and share repurchase program or reinvest in new opportunities. It expects that tally to more than double in five years, powered by growth in the fees it generates and increased cash distributions from its private funds and public affiliates. 

Brookfield Infrastructure, on the other hand, makes money by operating infrastructure businesses. Its portfolio currently consists of utilities and energy, transportation, and data infrastructure assets. These entities generate relatively stable revenue supported by government regulated rates or long-term, fee-based contracts with customers. The company produced about $1.3 billion of income last year, roughly two-thirds of which it distributed to investors via its dividend while reinvesting the rest to expand its infrastructure portfolio. 

Brookfield vs. Brookfield: How they differ

There are two major differences between Brookfield Asset Management and its infrastructure affiliate. The biggest one is in the diversification of their businesses.

Brookfield Asset Management has more than $540 billion of assets under management across the real estate, infrastructure, renewable power, private equity, and credit asset classes. It offers investors broad exposure to several important sectors.

Brookfield Infrastructure, on the other hand, focuses solely on infrastructure. While it does operate a globally diverse portfolio of assets, it has concentrated its efforts on owning businesses that support the movement of people, energy, data, and goods.

The other main difference between these two companies is how they allocate their free cash flow. Brookfield Asset Management typically pays out about 30% of its available cash via its dividend while using the rest to either buy back its stock if it trades at an attractive level or reinvest it in its funds or listed entities. Brookfield Infrastructure, on the other hand, usually pays out about 60%-70% of its annual cash flow in dividends and reinvests the rest into expanding its existing assets, giving it a much higher yield -- 5.9%, versus 1.7% at Brookfield Asset. Furthermore, its focus is on growing its dividend, with it aiming to increase it by 5% to 9% per year. While Brookfield Asset also has a long history of increasing its payout, including giving its investors a 12% raise this year, its priority isn't on paying dividends but on allocating capital to create the most shareholder value.

The better buy depends on your situation

Brookfield Asset Management and its infrastructure affiliate cater to different investor types. Brookfield Asset is an ideal option for those who are seeking a company that can generate market-beating total returns. Brookfield Infrastructure, on the other hand, is better suited for income-focused investors, given its much higher yield.

However, if I had to choose just one to own, I'd go with Brookfield Asset Management. That's because it offers greater diversification and higher total return potential as it aims to use more of its fast-growing cash flow to create additional value for its investors by reinvesting it on growth or returning it via share repurchases.