Financial Contrast: Fortis (NYSE:FTS) and American Electric Power (NYSE:AEP)

Fortis (NYSE:FTS) and American Electric Power (NYSE:AEP) are both large-cap utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Dividends

Fortis pays an annual dividend of $1.34 per share and has a dividend yield of 3.5%. American Electric Power pays an annual dividend of $2.68 per share and has a dividend yield of 3.0%. Fortis pays out 70.2% of its earnings in the form of a dividend. American Electric Power pays out 67.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Fortis has raised its dividend for 2 consecutive years and American Electric Power has raised its dividend for 6 consecutive years.

Institutional & Insider Ownership

52.2% of Fortis shares are owned by institutional investors. Comparatively, 73.6% of American Electric Power shares are owned by institutional investors. 0.2% of American Electric Power shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations for Fortis and American Electric Power, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortis 1 4 3 0 2.25
American Electric Power 0 8 7 0 2.47

Fortis currently has a consensus target price of $52.33, suggesting a potential upside of 35.16%. American Electric Power has a consensus target price of $80.93, suggesting a potential downside of 8.37%. Given Fortis’ higher possible upside, research analysts plainly believe Fortis is more favorable than American Electric Power.

Profitability

This table compares Fortis and American Electric Power’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fortis 12.61% 6.44% 2.06%
American Electric Power 12.64% 10.81% 3.00%

Volatility & Risk

Fortis has a beta of 0.14, indicating that its share price is 86% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.16, indicating that its share price is 84% less volatile than the S&P 500.

Valuation and Earnings

This table compares Fortis and American Electric Power’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fortis $6.44 billion 2.59 $899.56 million $1.91 20.27
American Electric Power $16.20 billion 2.69 $1.92 billion $3.95 22.36

American Electric Power has higher revenue and earnings than Fortis. Fortis is trading at a lower price-to-earnings ratio than American Electric Power, indicating that it is currently the more affordable of the two stocks.

Summary

American Electric Power beats Fortis on 15 of the 17 factors compared between the two stocks.

Fortis Company Profile

Fortis Inc. operates as an electric and gas utility company in Canada, the United States, and the Caribbean. It generates, transmits, and distributes electricity to approximately 425,000 retail customers in southeastern Arizona; and 97,000 retail customers in Arizona's Mohave and Santa Cruz counties with an aggregate capacity of 3,377 MW (MW), including 57 MW of solar capacity. The company also sells wholesale electricity to other entities in the western United States; owns gas-fired and hydroelectric generating capacity totaling 64 MW; and distributes natural gas to approximately 1,030,000 customers in British Columbia, Canada. In addition, it owns and operates the electricity distribution system that serves approximately 564,000 customers in southern and central Alberta; owns four hydroelectric generating facilities with a combined capacity of 225 MW; and provides operation, maintenance, and management services to hydroelectric generating facilities. Further, the company distributes electricity in the island portion of Newfoundland and Labrador serving approximately 268,000 customers with an installed generating capacity of 139 MW; and on Prince Edward Island serving approximately 81,000 customers through generating facilities with a combined capacity of 145 MW. Additionally, it provides integrated electric utility service to approximately 176,000 customers in British Columbia; approximately 268,000 customers in Newfoundland and Labrador; approximately 30,000 customers on Grand Cayman, Cayman Islands; and approximately 15,000 customers on certain islands in Turks and Caicos, as well as holds long-term contracted generation assets in British Columbia and Belize, and the Aitken Creek natural gas storage facility. It also owns and operates transmission and distribution lines; and natural gas pipelines. Fortis Inc. was founded in 1885 and is headquartered in St. John's, Canada.

American Electric Power Company Profile

American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. The company generates electricity using coal and lignite, natural gas, nuclear, hydroelectric, solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. The company owns, leases, or controls approximately 3,664 railcars, 468 barges, 9 towboats, and a coal handling terminal with approximately 18 million tons of annual capacity. American Electric Power Company, Inc. was founded in 1906 and is headquartered in Columbus, Ohio.

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