Western Gas Partners (NYSE: WES) and Midcoast Energy Partners (NYSE:MEP) are both oils/energy 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.
Western Gas Partners pays an annual dividend of $3.62 per share and has a dividend yield of 7.7%. Midcoast Energy Partners pays an annual dividend of $1.43 per share and has a dividend yield of 18.0%. Western Gas Partners pays out 294.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Midcoast Energy Partners pays out -39.0% of its earnings in the form of a dividend. Western Gas Partners has increased its dividend for 9 consecutive years and Midcoast Energy Partners has increased its dividend for 2 consecutive years. Midcoast Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Western Gas Partners and Midcoast Energy Partners’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Western Gas Partners||26.41%||14.68%||7.24%|
|Midcoast Energy Partners||-5.25%||-34.51%||-2.64%|
Earnings and Valuation
This table compares Western Gas Partners and Midcoast Energy Partners’ revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Western Gas Partners||$1.80 billion||3.98||$591.33 million||$1.23||38.21|
|Midcoast Energy Partners||N/A||N/A||N/A||($3.67)||-2.17|
Western Gas Partners has higher revenue and earnings than Midcoast Energy Partners. Midcoast Energy Partners is trading at a lower price-to-earnings ratio than Western Gas Partners, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Western Gas Partners has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500. Comparatively, Midcoast Energy Partners has a beta of 2.45, meaning that its stock price is 145% more volatile than the S&P 500.
This is a breakdown of current ratings for Western Gas Partners and Midcoast Energy Partners, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Western Gas Partners||1||3||6||0||2.50|
|Midcoast Energy Partners||0||1||0||0||2.00|
Western Gas Partners presently has a consensus target price of $60.20, indicating a potential upside of 28.09%. Midcoast Energy Partners has a consensus target price of $8.00, indicating a potential upside of 0.63%. Given Western Gas Partners’ stronger consensus rating and higher probable upside, equities analysts clearly believe Western Gas Partners is more favorable than Midcoast Energy Partners.
Insider & Institutional Ownership
61.8% of Western Gas Partners shares are held by institutional investors. Comparatively, 64.7% of Midcoast Energy Partners shares are held by institutional investors. 0.0% of Western Gas Partners shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
Western Gas Partners beats Midcoast Energy Partners on 10 of the 14 factors compared between the two stocks.
About Western Gas Partners
Western Gas Partners, LP is a master limited partnership (MLP) that acquires, owns, develops and operates midstream energy assets. The Company is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, natural gas liquids (NGLs) and crude oil in the United States. The Company provides midstream services for Anadarko Petroleum Corporation (Anadarko), as well as for third-party producers and customers. The Company’s operations and activities are managed by its general partner, which is indirectly controlled by Anadarko through Western Gas Equity Partners, LP (WGP). As of December 31, 2016, its assets and investments consisted of gathering systems, treating facilities, natural gas processing plants/trains, NGL pipelines, natural gas pipelines and oil pipelines. These assets and investments are located in the Rocky Mountains (Colorado, Utah and Wyoming), North-central Pennsylvania and Texas.
About Midcoast Energy Partners
Midcoast Energy Partners, L.P. (MEP) is a limited partnership company that is engaged in the natural gas and natural gas liquids (NGL) midstream business. It operates through two segments: Gathering, Processing and Transportation, and Logistics and Marketing. It also provides marketing services of natural gas and NGLs to wholesale customers. The Company’s gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business. The Company holds interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities.
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