Analyzing American Electric Power (AEP) & Atlantica Yield (AY)

American Electric Power (NYSE: AEP) and Atlantica Yield (NASDAQ:AY) are both utilities companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, institutional ownership, valuation and risk.

Institutional and Insider Ownership

70.5% of American Electric Power shares are owned by institutional investors. Comparatively, 51.9% of Atlantica Yield shares are owned by institutional investors. 0.2% of American Electric Power shares are owned by company 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 breakdown of current ratings for American Electric Power and Atlantica Yield, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Electric Power 0 5 9 0 2.64
Atlantica Yield 0 1 3 0 2.75

American Electric Power presently has a consensus target price of $74.23, indicating a potential upside of 13.19%. Atlantica Yield has a consensus target price of $24.75, indicating a potential upside of 23.94%. Given Atlantica Yield’s stronger consensus rating and higher probable upside, analysts plainly believe Atlantica Yield is more favorable than American Electric Power.

Valuation & Earnings

This table compares American Electric Power and Atlantica Yield’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Electric Power $15.40 billion 2.09 $1.91 billion $3.83 17.12
Atlantica Yield $971.80 million 2.06 -$4.85 million $0.27 73.96

American Electric Power has higher revenue and earnings than Atlantica Yield. American Electric Power is trading at a lower price-to-earnings ratio than Atlantica Yield, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

American Electric Power has a beta of 0.18, meaning that its stock price is 82% less volatile than the S&P 500. Comparatively, Atlantica Yield has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500.

Profitability

This table compares American Electric Power and Atlantica Yield’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Electric Power 12.39% 10.05% 2.86%
Atlantica Yield 2.85% 1.41% 0.27%

Dividends

American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.8%. Atlantica Yield pays an annual dividend of $1.16 per share and has a dividend yield of 5.8%. American Electric Power pays out 64.8% of its earnings in the form of a dividend. Atlantica Yield pays out 429.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Electric Power has increased its dividend for 5 consecutive years.

Summary

American Electric Power beats Atlantica Yield on 12 of the 17 factors compared between the two stocks.

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.

Atlantica Yield Company Profile

Atlantica Yield plc, formerly Abengoa Yield plc, is a total return company. The Company owns, manages, and acquires renewable energy, conventional power, electric transmission lines and water assets, focused on North America (the United States and Mexico), South America (Peru, Chile, Brazil and Uruguay) and Europe, Middle East and Africa (Spain, Algeria and South Africa). Its segments include North America, South America and EMEA. It operates in business sectors, including renewable energy, conventional power, electric transmission lines and water. As of December 31, 2016, it owned or had interests in 21 assets, comprising 1,442 megawatt (MW) of renewable energy generation, 300 MW of conventional power generation, 1,099 miles of electric transmission lines, as well as an exchangeable preferred equity investment in Abengoa Concessoes Brasil Holding S.A., (ACBH). The renewable energy sector includes its activities related to the production electricity from solar power and wind plants.

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