This is The First Energy Stock I Plan to Buy in July (Hint: It's Not Energy Transfer)

I have been steadily adding to my Energy Transfer (NYSE: ET) position this year. I've purchased units of the master limited partnership (MLP) three times already this year. It's one of my favorite energy investments for generating passive income. I also like that the midstream company has strong growth visibility as it builds out its natural gas infrastructure to support growing power demand from AI data centers.

However, as much as I like investing in the MLP, Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) has surpassed it as my favorite energy stock to buy right now. Here's why it's the first one I plan to buy in July.

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A more compelling value proposition this month

Energy Transfer is having a strong year. Units of the MLP are already up more than 15%, nearly doubling the S&P 500's 8% return. That surge has driven down its distribution yield to 7%. While that's still a very attractive level compared to the S&P 500's 1.1% yield, it's not as high as it was earlier this year.

Brookfield Infrastructure, on the other hand, has trailed both the S&P 500 and Energy Transfer by declining more than 15% on the year. That sell-off has driven down its dividend yield to 4.7%. That's a very attractive level for such a high-quality income stream. Brookfield has increased its dividend for 17 straight years (every year since its inception), growing it at a 9% compound annual rate. The company expects to deliver 5% to 9% annual dividend growth going forward, much faster than the 3% to 4% annual distribution growth rate Energy Transfer expects.

Faster, broader AI-fueled growth

Shares of Brookfield Infrastructure have sold off this year even though its growth rate is accelerating. The company's funds from operations (FFO) per share grew 10% in the first quarter, up from the 6% growth rate it delivered last year. Notable drivers included its data segment (up 46%) and its energy midstream segment (up 12%).

Brookfield Infrastructure expects to deliver more than 10% annual FFO per share growth going forward. It anticipates delivering 6% to 9% annual organic growth, driven by inflation-indexed rate increases, volume growth as the global economy expands, and growth capital projects. Brookfield currently has over $9 billion of growth capital projects in its backlog across its utilities, transport, midstream, and data infrastructure segments. Its expertise in energy is leading Brookfield to invest directly in developing data centers. It's also investing in deploying advanced fuel cells at data centers under long-term contracts with the operating tenants.

Additionally, Brookfield expects to continue making value-enhancing acquisitions. The company has secured about $1.5 billion of new investments over the past year, including an interest in a leading U.S. refined products pipeline system, a South Korean industrial gas business, and a natural gas infrastructure business in New Zealand. These and future acquisitions should help push its growth rate above 10% annually.

Overall, Brookfield has a much more diversified growth profile compared to Energy Transfer, with multiple AI-related catalysts. While Energy Transfer is building new gas pipelines to support AI-driven power demand, Brookfield is investing directly in powered AI data centers. It's also investing in natural gas pipelines and utility projects to support rising power demand. Additionally, it's investing in other AI infrastructure solutions, including an industrial gas business in South Korea that supports semiconductor manufacturers, and recently launched an exclusive industrial equipment leasing platform for data centers.

A better opportunity this month

Energy Transfer remains one of my favorite income investments from the energy sector. However, Brookfield Infrastructure is a more compelling investment opportunity this month, given its 15% year-to-date decline in share price. That boosted its yield and total return potential, which is why I plan to make it the first energy stock I buy in July.

Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, and Energy Transfer. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.