Analyzing Algonquin Power & Utilities (NYSE:AQN) and American Electric Power (NASDAQ:AEP)

Algonquin Power & Utilities (NYSE:AQN) and American Electric Power (NASDAQ:AEP) are both utilities companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, analyst recommendations, profitability and institutional ownership.

Valuation and Earnings

This table compares Algonquin Power & Utilities 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
Algonquin Power & Utilities $1.62 billion 6.01 $530.88 million $0.63 25.87
American Electric Power $15.56 billion 2.77 $1.92 billion $4.24 20.45

American Electric Power has higher revenue and earnings than Algonquin Power & Utilities. American Electric Power 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.

Dividends

Algonquin Power & Utilities pays an annual dividend of $0.62 per share and has a dividend yield of 3.8%. American Electric Power pays an annual dividend of $2.96 per share and has a dividend yield of 3.4%. 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. American Electric Power pays out 69.8% of its earnings in the form of a dividend. 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.

Insider & Institutional Ownership

45.9% of Algonquin Power & Utilities shares are held by institutional investors. Comparatively, 75.0% of American Electric Power shares are held by institutional investors. 0.2% of American Electric Power shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Algonquin Power & Utilities 27.73% 7.87% 3.10%
American Electric Power 12.82% 10.19% 2.66%

Analyst Ratings

This is a summary of current ratings and price targets for Algonquin Power & Utilities and American Electric Power, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Algonquin Power & Utilities 1 4 4 0 2.33
American Electric Power 1 2 10 0 2.69

Algonquin Power & Utilities currently has a consensus target price of $16.83, indicating a potential upside of 3.27%. American Electric Power has a consensus target price of $92.33, indicating a potential upside of 6.51%. Given American Electric Power’s stronger consensus rating and higher probable upside, analysts plainly believe American Electric Power is more favorable than Algonquin Power & Utilities.

Volatility and Risk

Algonquin Power & Utilities has a beta of 0.39, indicating that its share price is 61% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.22, indicating that its share price is 78% less volatile than the S&P 500.

Summary

American Electric Power beats Algonquin Power & Utilities on 11 of the 17 factors compared between the two stocks.

Algonquin Power & Utilities Company Profile

Algonquin Power & Utilities Corp. operates as a diversified utility company. The firm engages in the ownership and operation of a portfolio of regulated and non-regulated generation, distribution and transmission utility assets. It operates through the following segments: Regulated Services Group, and Renewable Energy Group. The Regulated Services Group segment owns and operates a portfolio of electric, natural gas, water distribution and wastewater collection utility systems and transmission operations in the United States and Canada. The Renewable Energy Group segment owns and operates a diversified portfolio of renewable and thermal electric generation assets in North America and internationally. The company was founded on August 1, 1988 and is headquartered in Oakville, Canada.

American Electric Power Company Profile

American Electric Power Co., Inc. engages in the business of generation, transmission and distribution of electricity. It operates through the following segments: Vertically Integrated Utilities, Transmission & Distribution Utilities, AEP Transmission Holdco and Generation & Marketing. The Vertically Integrated Utilities segment engages in the generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by its subsidiaries. The Transmission & Distribution Utilities segment engages in the business of transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by its subsidiaries. The AEP Transmission Holdco segment engages in the development, construction and operation of transmission facilities through investments in its wholly-owned transmission subsidiaries and joint ventures. The Generation & Marketing segment engages in non-regulated generation and marketing, risk management and retail activities. The company was founded on December 20, 1906 and is headquartered in Columbus, OH.

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