Source: Spectra Energy Corp. 

There's just a one-word difference between Spectra Energy Corp. (SE) and Spectra Energy Partners, LP (SEP), but the two companies could not be more different. For natural gas investors looking for dividends, knowing the relationship between these two companies is crucial. Let's start at the beginning.

Spinning off a spin-off
In 2007, Duke Energy Corporation (DUK -0.36%) spun off its natural gas businesses into Spectra Energy Corp. Following Duke Energy Corporation's Board approval, then-CEO Jim Rogers noted: "Today, we have taken some of the final steps to unlock the value of our power and gas businesses as stand-alone companies. We believe that over the long term, our investors will reap greater value than they would have received had we not separated the company." 

The distribution was tax-free for Duke Energy Corporation, and it allowed the utility to focus more exclusively on its electricity business. But while we'll never know for sure whether Duke Energy Corporation would've been better off sticking with Spectra Energy Corp., Spectra's share price has soared ahead of Duke Energy Corporation's over the past five years.

DUK Chart

DUK data by YCharts.

But Spectra Energy Corp. is only one piece of the puzzle. In the same year Duke Energy Corporation spun off Spectra, Duke's spin-off began a spin-off of its own -- and Spectra Energy Partners, LP was born.

Spectra Energy Partners, LP was an answer to investors' insistence that Spectra Energy Corp. make the most of its tax-free potential. Spectra Energy Partners enjoys a special "Master Limited Partnership" (MLP) tax status since it derives 90% or more of its cash flows from natural resources  -- in this case, natural gas.

While Spectra Energy Corp. provides capital to its MLP and receives income distributions in return, Spectra Energy Partners, LP doesn't have to pay a single cent on its initial profit -- meaning more money to reinvest or distribute to shareholders. 

Spectra Energy Partners, LP is 84% owned by its big brother, despite Spectra Energy Corp.'s complete dropdown of all remaining U.S. transmission, storage, and liquid assets last November. 

The split has been good for both companies, with shares soaring in June 2013 following Spectra Energy Corp.'s announcement that it would complete its asset drop-down by the end of the year. That single press release pushed stock prices off the pathetic performance of the Dow Jones U.S. Utilities Index, and around 10 percentage points ahead of the S&P 500's excellent year.

SE Chart

SE data by YCharts.

Which should you buy?
Spectra Energy Corp. and Spectra Energy Partners, LP are both attractive investing options. Each offers a natural gas investment that should continue to grow alongside America's expanding natural gas infrastructure.

Spectra Energy Partners, LP enjoys stable cash flow from its fee-based businesses, which include more than 17,000 miles of transmission and gather pipelines, 150 billion cubic feet of natural gas storage, and a bonus asset of 4.8 million barrels of crude oil storage. 

Source: Spectra Energy Partners, LP.

But investing in Spectra Energy Partners, LP might be missing the forest for the trees. Although the MLP offers stability, Spectra Energy Corp. enjoys nearly full ownership of Spectra Energy Partners, while expanding its own diversity further.

The company also has a 50% stake in MLP DCP Midstream (DCP), the largest gas gatherer and processer in the United States. Its Westcoast Energy natural gas utility in British Columbia, Canada, further spreads the company's geographic diversity while its Great Lakes-area Union Gas company is the second-largest gas distributor in Canada. These Canadian assets alone amount to 39% of Spectra Energy Corp.'s EBITDA. 

Although Spectra Energy Partners, LP's current 4.7% dividend yield beats out its big brother's by a full percentage point, long-term investors looking for dynamic diversification will be better treated by Spectra Energy Corp.