Head to Head Survey: Williams Companies (WMB) versus Tallgrass Energy GP (TEGP)

Williams Companies (NYSE: WMB) and Tallgrass Energy GP (NYSE:TEGP) are both mid-cap oils/energy companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, valuation, risk, dividends, institutional ownership, analyst recommendations and earnings.

Dividends

Williams Companies pays an annual dividend of $1.20 per share and has a dividend yield of 3.6%. Tallgrass Energy GP pays an annual dividend of $1.42 per share and has a dividend yield of 5.5%. Williams Companies pays out 210.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy GP pays out 177.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Williams Companies has raised its dividend for 2 consecutive years. Tallgrass Energy GP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Williams Companies and Tallgrass Energy GP’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Williams Companies $7.50 billion 3.66 -$424.00 million $0.57 58.26
Tallgrass Energy GP $605.12 million 6.72 $26.79 million $0.80 32.31

Tallgrass Energy GP has lower revenue, but higher earnings than Williams Companies. Tallgrass Energy GP is trading at a lower price-to-earnings ratio than Williams Companies, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Williams Companies and Tallgrass Energy GP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Williams Companies 5.90% 3.23% 1.02%
Tallgrass Energy GP 7.07% 2.46% 1.12%

Institutional and Insider Ownership

84.8% of Williams Companies shares are owned by institutional investors. Comparatively, 36.3% of Tallgrass Energy GP shares are owned by institutional investors. 0.5% of Williams Companies shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Williams Companies has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Tallgrass Energy GP has a beta of 1.97, suggesting that its share price is 97% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Williams Companies and Tallgrass Energy GP, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Williams Companies 0 2 11 1 2.93
Tallgrass Energy GP 1 4 4 0 2.33

Williams Companies presently has a consensus target price of $34.27, suggesting a potential upside of 3.20%. Tallgrass Energy GP has a consensus target price of $30.00, suggesting a potential upside of 16.05%. Given Tallgrass Energy GP’s higher possible upside, analysts clearly believe Tallgrass Energy GP is more favorable than Williams Companies.

About Williams Companies

The Williams Companies, Inc. is an energy infrastructure company. The Company is focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGL), and olefins. As of December 31, 2016, its interstate gas pipelines, midstream and olefins production interests were held through its investment in Williams Partners L.P. (WPZ). The Company’s segments include Williams Partners, Williams NGL & Petchem Services and Other. The Williams Partners segment includes its consolidated master limited partnership, WPZ. The gas pipeline business includes interstate natural gas pipelines and pipeline joint project investments. The midstream business provides natural gas gathering, treating, processing and compression services. The Williams NGL & Petchem Services segment includes its Texas Belle pipeline and certain other domestic olefins pipeline assets. Other segment includes its corporate operations and Canadian construction services company.

About Tallgrass Energy GP

Tallgrass Energy GP, LP is a limited partnership company, which includes the operations of Tallgrass Equity, LLC (Tallgrass Equity), Tallgrass MLP GP, LLC, Tallgrass Energy Partners, LP (TEP), and TEP’s subsidiaries. TEP owns, operates, acquires and develops midstream energy assets in North America. TEP’s segments include Crude Oil Transportation & Logistics, which is engaged in the ownership and operation of a crude oil pipeline system, and crude oil storage and terminaling facilities; Natural Gas Transportation & Logistics, which is engaged in the ownership and operation of interstate natural gas pipelines and integrated natural gas storage facilities; Processing & Logistics, which is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities, and the provision of water business services to the oil and gas exploration and production industry, and Corporate and Other.

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