Analyzing National Grid Transco (NYSE:NGG) and AES (NYSE:AES)

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

Dividends

AES pays an annual dividend of $0.70 per share and has a dividend yield of 4.9%. National Grid Transco pays an annual dividend of $2.11 per share and has a dividend yield of 2.6%. AES pays out 43.8% of its earnings in the form of a dividend. AES has increased its dividend for 12 consecutive years. AES is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares AES and National Grid Transco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AES	9.47%	18.83%	3.04%
National Grid Transco	N/A	N/A	N/A

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AES	0	4	7	0	2.64
National Grid Transco	1	5	4	0	2.30

AES presently has a consensus target price of $23.83, suggesting a potential upside of 67.36%. National Grid Transco has a consensus target price of $83.80, suggesting a potential upside of 3.67%. Given AES’s stronger consensus rating and higher possible upside, equities research analysts clearly believe AES is more favorable than National Grid Transco.

Insider and Institutional Ownership

93.1% of AES shares are owned by institutional investors. Comparatively, 4.7% of National Grid Transco shares are owned by institutional investors. 0.6% of AES shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares AES and National Grid Transco”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AES	$12.28 billion	0.83	$1.68 billion	$1.60	8.90
National Grid Transco	$23.61 billion	3.40	$3.70 billion	N/A	N/A

National Grid Transco has higher revenue and earnings than AES.

Volatility & Risk

AES has a beta of 0.98, meaning that its stock price is 2% less volatile than the S&P 500. Comparatively, National Grid Transco has a beta of 0.8, meaning that its stock price is 20% less volatile than the S&P 500.

Summary

AES beats National Grid Transco on 11 of the 15 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 National Grid Transco

National Grid plc transmits and distributes electricity and gas. It operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, New York, National Grid Ventures, and Other segments. The UK Electricity Transmission segment provides electricity transmission and construction work services in England and Wales. The UK Electricity Distribution segment offers electricity distribution services in Midlands, and South West of England and South Wales. The UK Electricity System Operator segment provides balancing services for supply and demand of electricity on Great Britain’s electricity transmission system; and acts as an agent on behalf of transmission operators. The New England segment offers electricity and gas distribution, and electricity transmission services in New England. The New York segment provides electricity and gas distribution, and electricity transmission services in New York. The National Grid Ventures segment provides transmission services through electricity interconnectors and LNG importation at the Isle of Grain, as well as sale of renewables projects. The Other segment engages in the leasing and sale of commercial property, as well as insurance activities in the United Kingdom. The company was founded in 1990 and is headquartered in London, the United Kingdom.