TransAlta (NYSE:TAC) and Algonquin Power & Utilities (NYSE:AQN) are both mid-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, risk, analyst recommendations and earnings.
Profitability
This table compares TransAlta and Algonquin Power & Utilities' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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TransAlta | -2.23% | -4.95% | -1.60% |
Algonquin Power & Utilities | 27.73% | 7.87% | 3.10% |
Earnings & Valuation
This table compares TransAlta and Algonquin Power & Utilities' top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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TransAlta | $1.77 billion | 1.33 | $61.79 million | ($0.09) | -96.56 |
Algonquin Power & Utilities | $1.62 billion | 5.70 | $530.88 million | $0.63 | 24.54 |
Algonquin Power & Utilities has lower revenue, but higher earnings than TransAlta. TransAlta is trading at a lower price-to-earnings ratio than Algonquin Power & Utilities, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
58.1% of TransAlta shares are held by institutional investors. Comparatively, 45.9% of Algonquin Power & Utilities shares are held by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Analyst Recommendations
This is a breakdown of current ratings for TransAlta and Algonquin Power & Utilities, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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TransAlta | 0 | 3 | 5 | 0 | 2.63 |
Algonquin Power & Utilities | 1 | 4 | 4 | 0 | 2.33 |
TransAlta presently has a consensus target price of $11.50, indicating a potential upside of 32.34%. Algonquin Power & Utilities has a consensus target price of $16.5278, indicating a potential upside of 6.91%. Given TransAlta's stronger consensus rating and higher probable upside, equities analysts clearly believe TransAlta is more favorable than Algonquin Power & Utilities.
Risk and Volatility
TransAlta has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500. Comparatively, Algonquin Power & Utilities has a beta of 0.39, meaning that its stock price is 61% less volatile than the S&P 500.
Dividends
TransAlta pays an annual dividend of $0.13 per share and has a dividend yield of 1.5%. Algonquin Power & Utilities pays an annual dividend of $0.62 per share and has a dividend yield of 4.0%. TransAlta pays out -144.4% of its earnings in the form of a dividend. Algonquin Power & Utilities pays out 98.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TransAlta has increased its dividend for 1 consecutive years and Algonquin Power & Utilities has increased its dividend for 7 consecutive years. Algonquin Power & Utilities is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Summary
Algonquin Power & Utilities beats TransAlta on 9 of the 16 factors compared between the two stocks.