Pinnacle West Capital (NYSE: PNW) and Westar Energy (NYSE:WR) are both mid-cap utilities companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.
Institutional & Insider Ownership
82.6% of Pinnacle West Capital shares are held by institutional investors. Comparatively, 74.6% of Westar Energy shares are held by institutional investors. 0.7% of Pinnacle West Capital shares are held by insiders. Comparatively, 0.7% of Westar Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Pinnacle West Capital pays an annual dividend of $2.78 per share and has a dividend yield of 3.6%. Westar Energy pays an annual dividend of $1.60 per share and has a dividend yield of 3.2%. Pinnacle West Capital pays out 63.9% of its earnings in the form of a dividend. Westar Energy pays out 70.5% 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. Pinnacle West Capital has raised its dividend for 12 consecutive years and Westar Energy has raised its dividend for 6 consecutive years. Pinnacle West Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares Pinnacle West Capital and Westar Energy’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Pinnacle West Capital||13.70%||9.59%||2.92%|
Earnings & Valuation
This table compares Pinnacle West Capital and Westar Energy’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Pinnacle West Capital||$3.57 billion||2.44||$488.45 million||$4.35||17.87|
|Westar Energy||$2.57 billion||2.80||$323.92 million||$2.27||22.33|
Pinnacle West Capital has higher revenue and earnings than Westar Energy. Pinnacle West Capital is trading at a lower price-to-earnings ratio than Westar Energy, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Pinnacle West Capital has a beta of 0.31, meaning that its share price is 69% less volatile than the S&P 500. Comparatively, Westar Energy has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.
This is a summary of current ratings and price targets for Pinnacle West Capital and Westar Energy, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Pinnacle West Capital||1||8||1||0||2.00|
Pinnacle West Capital presently has a consensus target price of $84.22, indicating a potential upside of 8.35%. Westar Energy has a consensus target price of $55.25, indicating a potential upside of 8.97%. Given Westar Energy’s stronger consensus rating and higher probable upside, analysts clearly believe Westar Energy is more favorable than Pinnacle West Capital.
Pinnacle West Capital beats Westar Energy on 10 of the 16 factors compared between the two stocks.
About Pinnacle West Capital
Pinnacle West Capital Corporation is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. It owned and leased 6,236 megawatt (MW) of regulated generation capacity and the Company held a mix of both long-term and short-term purchased power agreements for additional capacity, including agreements for the purchase of renewable energy, as of December 31, 2016. Its subsidiaries include Arizona Public Service Company, which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.
About Westar Energy
Westar Energy, Inc. is an electric utility. The Company provides electric generation, transmission and distribution services. The Company provides these services in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson. Its subsidiary, Kansas Gas and Electric Company (KGE), provides these services in south-central and southeastern Kansas, including the city of Wichita. Both the Company and KGE conduct business using the name Westar Energy. The Company supplies electric energy at retail to customers in Kansas. The Company also supplies electric energy at wholesale to municipalities and electric cooperatives in Kansas, and has contracts for the sale or purchase of wholesale electricity with other utilities. As of December 31, 2016, it had 6,292 megawatts (MW) of generating capacity in service.
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