NorthWestern (NYSE: NWE) and ALLETE (NYSE:ALE) are both mid-cap utilities companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, risk, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Institutional & Insider Ownership

93.6% of NorthWestern shares are owned by institutional investors. Comparatively, 73.2% of ALLETE shares are owned by institutional investors. 1.4% of NorthWestern shares are owned by company insiders. Comparatively, 0.4% of ALLETE shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares NorthWestern and ALLETE’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NorthWestern 12.86% 9.38% 3.01%
ALLETE 12.34% 8.40% 3.44%

Dividends

NorthWestern pays an annual dividend of $2.20 per share and has a dividend yield of 4.1%. ALLETE pays an annual dividend of $2.24 per share and has a dividend yield of 3.1%. NorthWestern pays out 66.7% of its earnings in the form of a dividend. ALLETE pays out 70.2% 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. NorthWestern has increased its dividend for 9 consecutive years and ALLETE has increased its dividend for 7 consecutive years. NorthWestern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for NorthWestern and ALLETE, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NorthWestern 3 1 1 0 1.60
ALLETE 1 5 0 0 1.83

NorthWestern presently has a consensus price target of $54.75, suggesting a potential upside of 0.92%. ALLETE has a consensus price target of $70.42, suggesting a potential downside of 3.68%. Given NorthWestern’s higher probable upside, equities research analysts clearly believe NorthWestern is more favorable than ALLETE.

Risk and Volatility

NorthWestern has a beta of 0.22, suggesting that its share price is 78% less volatile than the S&P 500. Comparatively, ALLETE has a beta of 0.33, suggesting that its share price is 67% less volatile than the S&P 500.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NorthWestern $1.31 billion 2.06 $162.70 million $3.30 16.44
ALLETE $1.42 billion 2.64 $172.20 million $3.19 22.92

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

Summary

NorthWestern beats ALLETE on 10 of the 17 factors compared between the two stocks.

NorthWestern Company Profile

NorthWestern Corporation, doing business as NorthWestern Energy, provides electricity and natural gas to residential, commercial, and industrial customers. The company operates through Electric Operations and Natural Gas Operations segments. It generates, transmits, and distributes electricity; and produces, stores, transmits, and distributes natural gas, as well as owns municipal franchises to provide natural gas service in the communities. The company's electric transmission and distribution network consists of approximately 24,660 miles of overhead and underground transmission and distribution lines, as well as 385 transmission and distribution substations in Montana; and transmission and distribution network comprises of approximately 3,560 miles of overhead and underground transmission and distribution lines, as well as 126 substations in South Dakota. Its natural gas transmission system consists of approximately 2,100 miles of pipeline. The company serves approximately 718,300 customers in Montana, South Dakota, and Nebraska, the United States. NorthWestern Corporation was founded in 1923 and is based in Sioux Falls, South Dakota.

ALLETE Company Profile

ALLETE, Inc. operates as an energy company. The company operates through three segments: Regulated Operations, ALLETE Clean Energy, and U.S. Water Services. It generates electricity from coal-fired, natural gas-fired, biomass co-fired, hydroelectric, wind, solar, and other sources. The company provides regulated electric, natural gas, and water services in northwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers, and 10,000 water customers, as well as regulated utility electric services in northeastern Minnesota to approximately 145,000 retail customers and 16 non-affiliated municipal customers. It also owns and maintains electric transmission assets in Wisconsin, Michigan, Minnesota, and Illinois. In addition, the company focuses on developing, acquiring, and operating clean and renewable energy projects; and owns and operates approximately 535 megawatt of wind energy generation. Further, it offers integrated water management for industry by combining chemical, equipment, engineering, and service for customized solutions to reduce water and energy usage. Additionally, the company is involved in the coal mining operations in North Dakota; and real estate investment activities in Florida. The company owns and operates 167 substations with a total capacity of 8,540 megavolt amperes. It serves taconite mining, iron concentrate, paper, pulp and wood products, pipeline, and other industries. The company was founded in 1906 and is headquartered in Duluth, Minnesota.

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