Westar Energy (NYSE: WR) and NorthWestern Corporation (NYSE:NWE) are both mid-cap utilities companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, institutional ownership, risk, earnings, profitabiliy, analyst recommendations and valuation.

Dividends

Westar Energy pays an annual dividend of $1.60 per share and has a dividend yield of 3.0%. NorthWestern Corporation pays an annual dividend of $2.10 per share and has a dividend yield of 3.3%. Westar Energy pays out 66.9% of its earnings in the form of a dividend. NorthWestern Corporation pays out 55.7% 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. Westar Energy has raised its dividend for 8 consecutive years and NorthWestern Corporation has raised its dividend for 11 consecutive years. NorthWestern Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Westar Energy and NorthWestern Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Westar Energy 13.28% 8.96% 3.01%
NorthWestern Corporation 14.14% 9.95% 3.05%

Valuation & Earnings

This table compares Westar Energy and NorthWestern Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Westar Energy $2.57 billion 2.97 $1.05 billion $2.39 22.44
NorthWestern Corporation $1.29 billion 2.40 $430.07 million $3.77 16.92

Westar Energy has higher revenue and earnings than NorthWestern Corporation. NorthWestern Corporation is trading at a lower price-to-earnings ratio than Westar Energy, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Westar Energy and NorthWestern Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Westar Energy 0 0 0 0 N/A
NorthWestern Corporation 0 3 0 0 2.00

NorthWestern Corporation has a consensus target price of $60.33, indicating a potential downside of 5.40%. Given NorthWestern Corporation’s higher possible upside, analysts clearly believe NorthWestern Corporation is more favorable than Westar Energy.

Volatility and Risk

Westar Energy has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500. Comparatively, NorthWestern Corporation has a beta of 0.39, meaning that its stock price is 61% less volatile than the S&P 500.

Institutional and Insider Ownership

75.0% of Westar Energy shares are owned by institutional investors. Comparatively, 96.0% of NorthWestern Corporation shares are owned by institutional investors. 0.6% of Westar Energy shares are owned by company insiders. Comparatively, 1.3% of NorthWestern Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

NorthWestern Corporation beats Westar Energy on 10 of the 15 factors compared between the two stocks.

Westar Energy Company Profile

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.

NorthWestern Corporation Company Profile

NorthWestern Corporation, doing business as North-Western Energy, provides electricity and natural gas. The Company’s segments are Electric operations, Natural gas operations and All other. As of December 31, 2016, the Company provided electricity and natural gas to approximately 709,600 customers in Montana, South Dakota and Nebraska. It generates and distributes electricity in South Dakota; distributes natural gas in South Dakota and Nebraska, and generates and distributes electricity and distributes natural gas in Montana. Its regulated electric utility business in Montana includes generation, transmission and distribution. As of December 31, 2016, it provided retail electricity in 110 communities in South Dakota. Its regulated natural gas utility business in Montana includes production, storage, transmission and distribution. As of December 31, 2016, it provided natural gas to approximately 88,500 customers in 60 South Dakota communities and four Nebraska communities.

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