American Electric Power (NASDAQ:AEP) and The Southern (NYSE:SO) are both large-cap utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.
Institutional & Insider Ownership
75.0% of American Electric Power shares are owned by institutional investors. Comparatively, 57.6% of The Southern shares are owned by institutional investors. 0.2% of American Electric Power shares are owned by insiders. Comparatively, 0.4% of The Southern shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
Dividends
American Electric Power pays an annual dividend of $2.96 per share and has a dividend yield of 3.4%. The Southern pays an annual dividend of $2.56 per share and has a dividend yield of 3.9%. American Electric Power pays out 69.8% of its earnings in the form of a dividend. The Southern pays out 82.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. The Southern has raised its dividend for 19 consecutive years. The Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Profitability
This table compares American Electric Power and The Southern's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| American Electric Power | 12.82% | 10.19% | 2.66% |
| The Southern | 15.80% | 10.08% | 2.69% |
Valuation & Earnings
This table compares American Electric Power and The Southern's gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| American Electric Power | $15.56 billion | 2.79 | $1.92 billion | $4.24 | 20.46 |
| The Southern | $21.42 billion | 3.22 | $4.75 billion | $3.11 | 20.94 |
The Southern has higher revenue and earnings than American Electric Power. American Electric Power is trading at a lower price-to-earnings ratio than The Southern, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for American Electric Power and The Southern, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| American Electric Power | 1 | 2 | 9 | 0 | 2.67 |
| The Southern | 3 | 2 | 7 | 0 | 2.33 |
American Electric Power presently has a consensus target price of $93.1818, indicating a potential upside of 7.40%. The Southern has a consensus target price of $66.3333, indicating a potential upside of 1.88%. Given American Electric Power's stronger consensus rating and higher possible upside, analysts plainly believe American Electric Power is more favorable than The Southern.
Risk and Volatility
American Electric Power has a beta of 0.22, suggesting that its stock price is 78% less volatile than the S&P 500. Comparatively, The Southern has a beta of 0.39, suggesting that its stock price is 61% less volatile than the S&P 500.
Summary
The Southern beats American Electric Power on 9 of the 17 factors compared between the two stocks.
