Hydro One (OTCMKTS:HRNNF – Get Free Report) and Southern (NYSE:SO – Get Free Report) are both large-cap utilities companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitability, institutional ownership, risk, analyst recommendations and valuation.
Profitability
This table compares Hydro One and Southern’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Hydro One | 14.88% | 11.02% | 3.56% |
| Southern | 15.43% | 12.93% | 3.28% |
Insider & Institutional Ownership
64.1% of Southern shares are owned by institutional investors. 0.2% of Southern shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Analyst Recommendations
This is a summary of recent ratings and target prices for Hydro One and Southern, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Hydro One | 1 | 5 | 1 | 0 | 2.00 |
| Southern | 2 | 11 | 8 | 0 | 2.29 |
Southern has a consensus target price of $97.00, suggesting a potential upside of 4.12%. Given Southern’s stronger consensus rating and higher probable upside, analysts plainly believe Southern is more favorable than Hydro One.
Dividends
Hydro One pays an annual dividend of $1.02 per share and has a dividend yield of 2.5%. Southern pays an annual dividend of $3.04 per share and has a dividend yield of 3.3%. Hydro One pays out 59.6% of its earnings in the form of a dividend. Southern pays out 72.9% 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. Southern has increased its dividend for 25 consecutive years. Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Earnings and Valuation
This table compares Hydro One and Southern”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Hydro One | $6.47 billion | 3.79 | $958.32 million | $1.71 | 23.88 |
| Southern | $29.55 billion | 3.63 | $4.34 billion | $4.17 | 22.34 |
Southern has higher revenue and earnings than Hydro One. Southern is trading at a lower price-to-earnings ratio than Hydro One, indicating that it is currently the more affordable of the two stocks.
Summary
Southern beats Hydro One on 12 of the 16 factors compared between the two stocks.
About Hydro One
Hydro One Limited, through its subsidiaries, operates as an electricity transmission and distribution company in Ontario. The company operates through three segments: Transmission, Distribution, and Other. It owns and operates approximately 30,000 circuit kilometers of high-voltage transmission lines and approximately 125,000 circuit kilometers primary low-voltage distribution lines. The company serves residential, small business, commercial, and industrial customers, as well as municipal utilities. It also provides telecommunications support services for its transmission and distribution businesses; and information and communications technology services and solutions. The company was incorporated in 2015 and is headquartered in Toronto, Canada.
About Southern
The Southern Company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity. The company also develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects and sells electricity in the wholesale market; and distributes natural gas in Illinois, Georgia, Virginia, and Tennessee, as well as provides gas marketing services, gas distribution operations, and gas pipeline investments operations. In addition, it owns and operates nuclear, coal, hydro, cogeneration, solar, wind, battery storage, and fuel cell facilities. Further, the constructs, operates, and maintains approximately 77,900 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial, and industrial customers. The company serves approximately 8.9 million electric and gas utility customers. Further, it develops distributed energy and resilience solutions; deploys microgrids for commercial, industrial, governmental, and utility customers; and offers digital wireless communications and fiber optics services. The Southern Company was incorporated in 1945 and is headquartered in Atlanta, Georgia.
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