Head-To-Head Contrast: AES (NYSE:AES) versus NiSource (NYSE:NI)

AES (NYSE:AES) and NiSource (NYSE:NI) are both utilities companies, but which is the superior stock? We will contrast the two businesses based on the strength of their profitability, dividends, analyst recommendations, earnings, institutional ownership, risk and valuation.

Risk & Volatility

AES has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500. Comparatively, NiSource has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500.

Dividends

AES pays an annual dividend of $0.70 per share and has a dividend yield of 5.4%. NiSource pays an annual dividend of $1.12 per share and has a dividend yield of 2.8%. AES pays out 49.3% of its earnings in the form of a dividend. NiSource pays out 59.6% 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. AES has raised its dividend for 12 consecutive years and NiSource has raised its dividend for 14 consecutive years. AES is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares AES and NiSource’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AES	8.42%	19.02%	3.01%
NiSource	14.46%	8.25%	2.73%

Institutional & Insider Ownership

93.1% of AES shares are held by institutional investors. Comparatively, 91.6% of NiSource shares are held by institutional investors. 0.6% of AES shares are held by company insiders. Comparatively, 0.2% of NiSource shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and price targets for AES and NiSource, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AES	2	2	6	2	2.67
NiSource	0	2	7	0	2.78

AES currently has a consensus price target of $24.67, suggesting a potential upside of 89.26%. NiSource has a consensus price target of $43.88, suggesting a potential upside of 8.13%. Given AES’s higher probable upside, equities analysts plainly believe AES is more favorable than NiSource.

Valuation & Earnings

This table compares AES and NiSource”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AES	$12.28 billion	0.76	$1.68 billion	$1.42	9.18
NiSource	$6.13 billion	3.12	$760.40 million	$1.88	21.58

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

Summary

AES beats NiSource on 11 of the 18 factors compared between the two stocks.

About AES

The AES Corporation, together with its subsidiaries, operates as a diversified power generation and utility company in the United States and internationally. The company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market. It uses various fuels and technologies to generate electricity, such as coal, gas, hydro, wind, solar, and biomass, as well as renewables comprising energy storage and landfill gas. The company owns and/or operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers. The company was formerly known as Applied Energy Services, Inc. and changed its name to The AES Corporation in April 2000. The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.

About NiSource

NiSource Inc., an energy holding company, operates as a regulated natural gas and electric utility company in the United States. It operates in two segments, Gas Distribution Operations and Electric Operations. The company distributes natural gas to approximately 3.3 million customers through approximately 55,000 miles of distribution main pipeline and the associated individual customer service lines; and 1,000 miles of transmission main pipeline in northern Indiana, Ohio, Pennsylvania, Virginia, Kentucky, and Maryland. It also generates, transmits, and distributes electricity to approximately 0.5 million customers in various counties in the northern part of Indiana, as well as engages in wholesale electric and transmission transactions. It owns and operates coal-fired electric generating stations in Wheatfield and Michigan City; combined cycle gas turbine in West Terre Haute; natural gas generating units in Wheatfield; hydro generating plants in Carroll County and White County; wind generating units in White County, Indiana; and solar generating units in Jasper County and White County. The company was formerly known as NIPSCO Industries, Inc. and changed its name to NiSource Inc. in April 1999. NiSource Inc. was founded in 1847 and is headquartered in Merrillville, Indiana.