Critical Comparison: Nextera Energy Partners (NYSE:NEP) & American Electric Power (NYSE:AEP)

Nextera Energy Partners (NYSE:NEP) and American Electric Power (NYSE:AEP) are both oils/energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, dividends, risk, valuation, earnings and institutional ownership.

Profitability

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

Net Margins Return on Equity Return on Assets
Nextera Energy Partners -8.89% -1.38% -0.70%
American Electric Power 13.52% 11.09% 3.01%

Dividends

Nextera Energy Partners pays an annual dividend of $2.14 per share and has a dividend yield of 3.6%. American Electric Power pays an annual dividend of $2.80 per share and has a dividend yield of 2.7%. Nextera Energy Partners pays out -141.7% of its earnings in the form of a dividend. American Electric Power pays out 70.9% 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. Nextera Energy Partners has raised its dividend for 4 consecutive years and American Electric Power has raised its dividend for 7 consecutive years. Nextera Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current recommendations and price targets for Nextera Energy Partners and American Electric Power, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nextera Energy Partners 0 0 6 0 3.00
American Electric Power 1 5 8 0 2.50

Nextera Energy Partners currently has a consensus price target of $57.08, indicating a potential downside of 3.38%. American Electric Power has a consensus price target of $98.67, indicating a potential downside of 4.07%. Given Nextera Energy Partners’ stronger consensus rating and higher probable upside, research analysts clearly believe Nextera Energy Partners is more favorable than American Electric Power.

Earnings & Valuation

This table compares Nextera Energy Partners and American Electric Power’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Nextera Energy Partners $855.00 million 4.20 -$105.00 million ($1.51) -39.13
American Electric Power $16.20 billion 3.14 $1.92 billion $3.95 26.04

American Electric Power has higher revenue and earnings than Nextera Energy Partners. Nextera Energy Partners 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.

Volatility & Risk

Nextera Energy Partners has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.08, meaning that its stock price is 92% less volatile than the S&P 500.

Institutional and Insider Ownership

77.1% of Nextera Energy Partners shares are owned by institutional investors. Comparatively, 73.6% of American Electric Power shares are owned by institutional investors. 0.6% of Nextera Energy Partners shares are owned by company insiders. Comparatively, 0.2% of American Electric Power shares are owned 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.

Summary

American Electric Power beats Nextera Energy Partners on 9 of the 17 factors compared between the two stocks.

About Nextera Energy Partners

NextEra Energy Partners, LP acquires, owns, and manages contracted clean energy projects in the United States. It owns a portfolio of contracted renewable generation assets consisting of wind and solar projects with approximately 4,859 megawatts of capacity, as well as seven contracted natural gas pipeline assets. The company was founded in 2014 and is headquartered in Juno Beach, Florida.

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. The company generates electricity using coal and lignite, natural gas, nuclear, hydroelectric, 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. The company owns, leases, or controls approximately 3,664 railcars, 468 barges, 9 towboats, and a coal handling terminal with approximately 18 million tons of annual capacity. American Electric Power Company, Inc. was founded in 1906 and is headquartered in Columbus, Ohio.

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