Southern (NYSE: SO) and American Electric Power (NYSE:AEP) are both large-cap utilities companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, profitability, dividends, risk and institutional ownership.
This table compares Southern and American Electric Power’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|American Electric Power||12.21%||9.67%||2.73%|
Southern has a beta of 0.13, suggesting that its stock price is 87% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500.
Valuation & Earnings
This table compares Southern and American Electric Power’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Southern||$19.90 billion||2.44||$2.49 billion||$0.56||86.21|
|American Electric Power||$16.40 billion||2.21||$610.90 million||$3.82||19.25|
Southern has higher revenue and earnings than American Electric Power. American Electric Power is trading at a lower price-to-earnings ratio than Southern, indicating that it is currently the more affordable of the two stocks.
Southern pays an annual dividend of $2.32 per share and has a dividend yield of 4.8%. American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.4%. Southern pays out 414.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Electric Power pays out 64.9% of its earnings in the form of a dividend. Southern has raised its dividend for 4 consecutive years and American Electric Power has raised its dividend for 15 consecutive years.
Insider and Institutional Ownership
53.7% of Southern shares are held by institutional investors. Comparatively, 71.0% of American Electric Power shares are held by institutional investors. 1.0% of Southern shares are held by insiders. Comparatively, 0.2% of American Electric Power shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
This is a breakdown of recent recommendations for Southern and American Electric Power, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|American Electric Power||0||7||6||0||2.46|
Southern presently has a consensus target price of $49.06, indicating a potential upside of 1.61%. American Electric Power has a consensus target price of $74.82, indicating a potential upside of 1.74%. Given American Electric Power’s stronger consensus rating and higher possible upside, analysts clearly believe American Electric Power is more favorable than Southern.
American Electric Power beats Southern on 9 of the 17 factors compared between the two stocks.
Southern Company Profile
The Southern Company (Southern Company) is a holding company. The Company owns all of the stock of the traditional electric operating companies and the parent entities of Southern Power Company (Southern Power) and Southern Company Gas, and owns other direct and indirect subsidiaries. The Company’s segments include Gas distribution operations, Gas marketing services, Wholesale gas services, Gas midstream operations and All other. The Gas distribution operations segment includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in seven states. The Gas marketing services segment provides natural gas commodity and related services to customers markets that provide for customer choice. The Wholesale gas services segment engages in natural gas storage and gas pipeline arbitrage. The Gas midstream operations consist primarily of gas pipeline investments, with storage and fuels.
American Electric Power Company Profile
American Electric Power Company, Inc. (AEP) is a public utility holding company that owns, directly or indirectly, all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries. The service areas of the Company’s public utility subsidiaries cover the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The Company’s segments include Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. AEP’s vertically integrated utility operations are engaged in the generation, transmission and distribution of electricity for sale to retail and wholesale customers. Transmission and Distribution Utilities segment consists of the transmission and distribution of electricity for sale to retail and wholesale customers. AEP Transmission Holdco develops, constructs and operates transmission facilities.
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