American Electric Power (NYSE: AEP) and CMS Energy Corporation (NYSE:CMS) are both large-cap utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitabiliy, risk, analyst recommendations, institutional ownership, dividends and earnings.
Earnings & Valuation
This table compares American Electric Power and CMS Energy Corporation’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|American Electric Power||$16.27 billion||2.07||$5.26 billion||$1.42||48.27|
|CMS Energy Corporation||$6.43 billion||2.00||$2.08 billion||$2.11||21.80|
American Electric Power has higher revenue and earnings than CMS Energy Corporation. CMS Energy Corporation 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.
This table compares American Electric Power and CMS Energy Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|American Electric Power||4.31%||10.78%||3.06%|
|CMS Energy Corporation||9.12%||13.94%||2.83%|
This is a breakdown of recent ratings and recommmendations for American Electric Power and CMS Energy Corporation, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|American Electric Power||0||8||6||0||2.43|
|CMS Energy Corporation||0||4||3||0||2.43|
American Electric Power presently has a consensus target price of $71.22, indicating a potential upside of 3.90%. CMS Energy Corporation has a consensus target price of $46.50, indicating a potential upside of 1.09%. Given American Electric Power’s higher probable upside, research analysts plainly believe American Electric Power is more favorable than CMS Energy Corporation.
Risk and Volatility
American Electric Power has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, CMS Energy Corporation has a beta of 0.16, indicating that its share price is 84% less volatile than the S&P 500.
Institutional & Insider Ownership
70.5% of American Electric Power shares are owned by institutional investors. Comparatively, 87.0% of CMS Energy Corporation shares are owned by institutional investors. 0.2% of American Electric Power shares are owned by company insiders. Comparatively, 0.7% of CMS Energy Corporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
American Electric Power pays an annual dividend of $2.36 per share and has a dividend yield of 3.4%. CMS Energy Corporation pays an annual dividend of $1.33 per share and has a dividend yield of 2.9%. American Electric Power pays out 166.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CMS Energy Corporation pays out 63.0% of its earnings in the form of a dividend. American Electric Power has increased its dividend for 4 consecutive years and CMS Energy Corporation has increased its dividend for 5 consecutive years.
About American Electric Power
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.
About CMS Energy Corporation
CMS Energy Corporation is an energy company operating primarily in Michigan. The Company operates through three segments: electric utility, which consists of regulated activities associated with the generation, transmission and distribution of electricity in Michigan; gas utility, which consists of regulated activities associated with the transportation, storage and distribution of natural gas in Michigan, and enterprises, which consists of various subsidiaries engaging primarily in domestic independent power production. The Company is the parent holding company of various subsidiaries, including Consumers Energy Company (Consumers), an electric and gas utility company, and CMS Enterprises Company (CMS Enterprises), a domestic independent power producer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a group of other industries.
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