TransAlta (NYSE:TAC – Get Free Report) and Northland Power (OTCMKTS:NPIFF – Get Free Report) are both mid-cap utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, dividends, analyst recommendations and risk.
Insider & Institutional Ownership
59.0% of TransAlta shares are owned by institutional investors. 13.1% of TransAlta shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Profitability
This table compares TransAlta and Northland Power’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| TransAlta | -2.76% | 8.85% | 0.66% |
| Northland Power | -5.60% | 10.29% | 3.31% |
Risk and Volatility
Dividends
TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.5%. Northland Power pays an annual dividend of $0.52 per share and has a dividend yield of 3.3%. TransAlta pays out -111.1% of its earnings in the form of a dividend. Northland Power pays out -126.8% 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. TransAlta has increased its dividend for 2 consecutive years. Northland Power is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a breakdown of current recommendations for TransAlta and Northland Power, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| TransAlta | 0 | 2 | 6 | 1 | 2.89 |
| Northland Power | 0 | 3 | 4 | 0 | 2.57 |
TransAlta presently has a consensus target price of $24.50, suggesting a potential upside of 86.37%. Given TransAlta’s stronger consensus rating and higher probable upside, analysts clearly believe TransAlta is more favorable than Northland Power.
Valuation and Earnings
This table compares TransAlta and Northland Power”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| TransAlta | $1.72 billion | 2.41 | -$98.77 million | ($0.18) | -73.03 |
| Northland Power | $1.74 billion | 2.35 | -$116.84 million | ($0.41) | -38.22 |
TransAlta has higher earnings, but lower revenue than Northland Power. TransAlta is trading at a lower price-to-earnings ratio than Northland Power, indicating that it is currently the more affordable of the two stocks.
Summary
TransAlta beats Northland Power on 12 of the 18 factors compared between the two stocks.
About TransAlta
TransAlta Corporation engages in the development, production, and sale of electric energy. It operates through Hydro, Wind and Solar, Gas, Energy Transition, and Energy Marketing segments. The Hydro segment holds interest of approximately 922 megawatts (MW) of owned hydroelectric generating capacity located in Alberta, British Columbia, and Ontario. The Wind and Solar segment has a net ownership interest of approximately 2,057 MW of owned wind and solar electrical-generating capacity, as well as battery storage facilities located in Alberta, Ontario, New Brunswick, and Québec in Canada; the states of Massachusetts, Minnesota, New Hampshire, North Carolina, Pennsylvania, Washington, and Wyoming in the United States; and the state of Western Australia. The Gas segment has a net ownership interest of approximately 2,775 MW of owned gas electrical-generating capacity, and facilities located in Alberta, Ontario, Michigan, and the state of Western Australia. The Energy Transition segment has a net ownership interest of approximately 671 MW of owned coal electrical-generating capacity, as well as operates the Skookumchuck hydro facility in Centralia; and engages in the highvale mine and the mine reclamation activities. The Energy Marketing segment is involved in the trading of power, natural gas, and environmental products. It serves customers in various industry segments, including commercial real estate, municipal, manufacturing, industrial, hospitality, finance, and oil and gas. TransAlta Corporation was founded in 1909 and is headquartered in Calgary, Canada.
About Northland Power
Northland Power Inc., an independent power producer, develops, builds, owns, and operates clean and green power projects in Canada, Netherlands, Germany, Spain, Colombia, and internationally. The company produces electricity from renewable resources, such as wind and solar, as well as natural gas for sale under power purchase agreements and other revenue arrangements. It owned or had an economic interest 3.4 gigawatts of operating generating capacity. The company was founded in 1987 and is headquartered in Toronto, Canada.
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