The Southern (NYSE:SO) and Otter Tail (NASDAQ:OTTR) are both utilities companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, dividends, institutional ownership, earnings, valuation, profitability and analyst recommendations.
Volatility and Risk
The Southern has a beta of 0.39, indicating that its share price is 61% less volatile than the S&P 500. Comparatively, Otter Tail has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500.
Profitability
This table compares The Southern and Otter Tail's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| The Southern | 15.80% | 10.08% | 2.69% |
| Otter Tail | 11.10% | 11.98% | 4.11% |
Valuation & Earnings
This table compares The Southern and Otter Tail's gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| The Southern | $21.42 billion | 3.15 | $4.75 billion | $3.11 | 20.54 |
| Otter Tail | $919.50 million | 2.10 | $86.85 million | $2.17 | 21.44 |
The Southern has higher revenue and earnings than Otter Tail. The Southern is trading at a lower price-to-earnings ratio than Otter Tail, indicating that it is currently the more affordable of the two stocks.
Dividends
The Southern pays an annual dividend of $2.56 per share and has a dividend yield of 4.0%. Otter Tail pays an annual dividend of $1.56 per share and has a dividend yield of 3.4%. 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. Otter Tail pays out 71.9% of its earnings in the form of a dividend. The Southern has raised its dividend for 19 consecutive years and Otter Tail has raised its dividend for 1 consecutive years. The Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional and Insider Ownership
57.6% of The Southern shares are owned by institutional investors. Comparatively, 46.0% of Otter Tail shares are owned by institutional investors. 0.4% of The Southern shares are owned by company insiders. Comparatively, 1.7% of Otter Tail shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Analyst Recommendations
This is a summary of recent recommendations and price targets for The Southern and Otter Tail, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| The Southern | 3 | 2 | 8 | 0 | 2.38 |
| Otter Tail | 0 | 0 | 2 | 0 | 3.00 |
The Southern currently has a consensus target price of $65.1538, indicating a potential upside of 1.98%. Otter Tail has a consensus target price of $47.50, indicating a potential upside of 2.11%. Given Otter Tail's stronger consensus rating and higher probable upside, analysts clearly believe Otter Tail is more favorable than The Southern.
Summary
The Southern beats Otter Tail on 11 of the 17 factors compared between the two stocks.
