PG&E (NYSE: PCG) and American Electric Power (NYSE:AEP) are both large-cap utilities companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.
Valuation & Earnings
This table compares PG&E and American Electric Power’s revenue, earnings per share (EPS) and valuation.
||Earnings Per Share
|American Electric Power
PG&E has higher revenue and earnings than American Electric Power. PG&E 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.
Institutional and Insider Ownership
81.1% of PG&E shares are held by institutional investors. Comparatively, 71.0% of American Electric Power shares are held by institutional investors. 0.2% of PG&E shares are held by insiders. Comparatively, 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 company will outperform the market over the long term.
This is a breakdown of current ratings and price targets for PG&E and American Electric Power, as reported by MarketBeat.com.
||Strong Buy Ratings
|American Electric Power
PG&E presently has a consensus price target of $62.59, suggesting a potential upside of 42.82%. American Electric Power has a consensus price target of $75.08, suggesting a potential upside of 11.30%. Given PG&E’s higher possible upside, research analysts clearly believe PG&E is more favorable than American Electric Power.
PG&E pays an annual dividend of $2.12 per share and has a dividend yield of 4.8%. American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.7%. PG&E pays out 48.7% of its earnings in the form of a dividend. American Electric Power pays out 64.9% 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. PG&E has raised its dividend for 5 consecutive years and American Electric Power has raised its dividend for 2 consecutive years. PG&E is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares PG&E and American Electric Power’s net margins, return on equity and return on assets.
||Return on Equity
||Return on Assets
|American Electric Power
Volatility and Risk
PG&E has a beta of 0.14, suggesting that its stock price is 86% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500.
PG&E beats American Electric Power on 11 of the 16 factors compared between the two stocks.
PG&E Company Profile
PG&E Corporation is a holding company. The Company’s primary operating subsidiary is Pacific Gas and Electric Company (the Utility), which operates in northern and central California. The Utility is engaged in the sale and delivery of electricity and natural gas to customers. The Utility generates electricity and provides electricity transmission and distribution services throughout its service territory in northern and central California to residential, commercial, industrial, and agricultural customers. The Utility provides bundled services (electricity, transmission and distribution services) to various customers in its service territory. As of December 31, 2016, the Utility owned approximately 18,400 circuit miles of interconnected transmission lines operating at voltages ranging from 60 kilovolt to 500 kilovolt. As of December 31, 2016, the Utility also operated 92 electric transmission substations with a capacity of approximately 64,600 megavolt ampere (MVA).
American Electric Power Company Profile
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.
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