Critical Survey: Ameren (NYSE:AEE) vs. TransAlta (NYSE:TAC)

Ameren (NYSE:AEE – Get Free Report) and TransAlta (NYSE:TAC – Get Free Report) are both utilities companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, risk, earnings and institutional ownership.

Institutional & Insider Ownership

79.1% of Ameren shares are owned by institutional investors. Comparatively, 59.0% of TransAlta shares are owned by institutional investors. 0.3% of Ameren shares are owned by insiders. Comparatively, 13.1% of TransAlta shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings for Ameren and TransAlta, as reported by MarketBeat.

Ameren presently has a consensus price target of $117.54, indicating a potential upside of 7.17%. TransAlta has a consensus price target of $22.25, indicating a potential upside of 60.48%. Given TransAlta’s stronger consensus rating and higher probable upside, analysts plainly believe TransAlta is more favorable than Ameren.

Dividends

Ameren pays an annual dividend of $3.00 per share and has a dividend yield of 2.7%. TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.4%. Ameren pays out 54.0% of its earnings in the form of a dividend. TransAlta pays out -37.0% 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. Ameren has increased its dividend for 12 consecutive years and TransAlta has increased its dividend for 2 consecutive years. Ameren is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Ameren and TransAlta’s net margins, return on equity and return on assets.

Volatility & Risk

Ameren has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500. Comparatively, TransAlta has a beta of 0.69, indicating that its stock price is 31% less volatile than the S&P 500.

Valuation & Earnings

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

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

Summary

Ameren beats TransAlta on 12 of the 18 factors compared between the two stocks.

About Ameren

(Get Free Report)

Ameren Corporation, together with its subsidiaries, operates as a public utility holding company in the United States. The company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. It engages in the rate-regulated electric generation, transmission, and distribution activities; and rate-regulated natural gas distribution business. In addition, the company generates electricity through coal, nuclear, and natural gas, as well as renewable sources, such as hydroelectric, wind, methane gas, and solar. It serves residential, commercial, and industrial customers. The company was founded in 1881 and is headquartered in Saint Louis, Missouri.

About TransAlta

(Get Free Report)

TransAlta Corporation engages in the development, production, and sale of electric energy. It operates through Hydro, Wind and Solar, Gas, Energy Transition, and Energy Marketing segments. The Hydro segment holds interest of approximately 922 megawatts (MW) of owned hydroelectric generating capacity located in Alberta, British Columbia, and Ontario. The Wind and Solar segment has a net ownership interest of approximately 2,057 MW of owned wind and solar electrical-generating capacity, as well as battery storage facilities located in Alberta, Ontario, New Brunswick, and Québec in Canada; the states of Massachusetts, Minnesota, New Hampshire, North Carolina, Pennsylvania, Washington, and Wyoming in the United States; and the state of Western Australia. The Gas segment has a net ownership interest of approximately 2,775 MW of owned gas electrical-generating capacity, and facilities located in Alberta, Ontario, Michigan, and the state of Western Australia. The Energy Transition segment has a net ownership interest of approximately 671 MW of owned coal electrical-generating capacity, as well as operates the Skookumchuck hydro facility in Centralia; and engages in the highvale mine and the mine reclamation activities. The Energy Marketing segment is involved in the trading of power, natural gas, and environmental products. It serves customers in various industry segments, including commercial real estate, municipal, manufacturing, industrial, hospitality, finance, and oil and gas. TransAlta Corporation was founded in 1909 and is headquartered in Calgary, Canada.