Head to Head Analysis: American Electric Power (NASDAQ:AEP) vs. RWE (OTCMKTS:RWEOY)

American Electric Power (NASDAQ:AEP) and RWE (OTCMKTS:RWEOY) are both large-cap utilities companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, earnings, analyst recommendations, dividends and profitability.

Insider and Institutional Ownership

75.2% of American Electric Power shares are held by institutional investors. 0.1% of American Electric Power shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
American Electric Power	17.68%	11.55%	3.11%
RWE	11.32%	4.85%	1.75%

Dividends

American Electric Power pays an annual dividend of $3.72 per share and has a dividend yield of 3.4%. RWE pays an annual dividend of $0.87 per share and has a dividend yield of 2.1%. American Electric Power pays out 54.4% of its earnings in the form of a dividend. RWE pays out 22.7% 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. American Electric Power has raised its dividend for 15 consecutive years. American Electric Power is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for American Electric Power and RWE, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Electric Power	1	8	5	0	2.29
RWE	0	0	2	1	3.33

American Electric Power presently has a consensus target price of $111.93, suggesting a potential upside of 2.26%. Given American Electric Power’s higher probable upside, analysts plainly believe American Electric Power is more favorable than RWE.

Volatility & Risk

American Electric Power has a beta of 0.46, suggesting that its stock price is 54% less volatile than the S&P 500. Comparatively, RWE has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500.

Earnings and Valuation

This table compares American Electric Power and RWE”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Electric Power	$19.72 billion	2.97	$2.97 billion	$6.84	16.00
RWE	$26.22 billion	1.09	$5.56 billion	$3.84	10.99

RWE has higher revenue and earnings than American Electric Power. RWE 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.

Summary

American Electric Power beats RWE on 12 of the 18 factors compared between the two stocks.

About American Electric Power

American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, renewable, nuclear, hydro, solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. American Electric Power Company, Inc. was incorporated in 1906 and is headquartered in Columbus, Ohio.

About RWE

RWE Aktiengesellschaft generates and supplies electricity from renewable and conventional sources in Germany, the United Kingdom, rest of Europe, North America, and internationally. It operates through five segments: Offshore Wind; Onshore Wind/Solar; Hydro/Biomass/Gas; Supply & Trading; and Coal/Nuclear. The company generates wind, hydro, solar, nuclear, gas, and biomass electricity. It also trades in electricity, gas, and energy commodities; operates gas storage facilities; and engages in battery storage activities. The company serves commercial, industrial, and corporate customers. RWE Aktiengesellschaft was founded in 1898 and is headquartered in Essen, Germany.