Comparing RGC Resources (NASDAQ:RGCO) and Northwest Natural Gas (NYSE:NWN)

RGC Resources (NASDAQ:RGCO) and Northwest Natural Gas (NYSE:NWN) are both utilities companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, earnings, risk, analyst recommendations, institutional ownership and dividends.

Profitability

This table compares RGC Resources and Northwest Natural Gas’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RGC Resources	13.05%	11.73%	4.15%
Northwest Natural Gas	9.75%	8.33%	2.03%

Earnings and Valuation

This table compares RGC Resources and Northwest Natural Gas”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RGC Resources	$95.33 million	2.33	$13.28 million	$1.34	15.88
Northwest Natural Gas	$1.29 billion	1.58	$113.32 million	$3.00	16.17

Northwest Natural Gas has higher revenue and earnings than RGC Resources. RGC Resources is trading at a lower price-to-earnings ratio than Northwest Natural Gas, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

RGC Resources has a beta of 0.52, meaning that its stock price is 48% less volatile than the S&P 500. Comparatively, Northwest Natural Gas has a beta of 0.44, meaning that its stock price is 56% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for RGC Resources and Northwest Natural Gas, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RGC Resources	0	0	2	0	3.00
Northwest Natural Gas	0	2	4	1	2.86

RGC Resources currently has a consensus price target of $27.00, indicating a potential upside of 26.88%. Northwest Natural Gas has a consensus price target of $55.80, indicating a potential upside of 15.00%. Given RGC Resources’ stronger consensus rating and higher possible upside, equities research analysts plainly believe RGC Resources is more favorable than Northwest Natural Gas.

Institutional and Insider Ownership

35.8% of RGC Resources shares are held by institutional investors. Comparatively, 75.1% of Northwest Natural Gas shares are held by institutional investors. 7.2% of RGC Resources shares are held by insiders. Comparatively, 0.6% of Northwest Natural Gas shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 4.1%. Northwest Natural Gas pays an annual dividend of $1.97 per share and has a dividend yield of 4.1%. RGC Resources pays out 64.9% of its earnings in the form of a dividend. Northwest Natural Gas pays out 65.7% 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. RGC Resources has increased its dividend for 22 consecutive years and Northwest Natural Gas has increased its dividend for 70 consecutive years. RGC Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

RGC Resources beats Northwest Natural Gas on 10 of the 18 factors compared between the two stocks.

About RGC Resources

RGC Resources, Inc., through its subsidiaries, operates as an energy services company. It sells and distributes natural gas to residential, commercial, and industrial customers in Roanoke, Virginia, and the surrounding localities. The company also provides various unregulated services. It operates approximately 1,179 miles of transmission and distribution pipeline; and a liquefied natural gas storage facility, as well as owns and operates six metering stations. In addition, it produces biogas. RGC Resources, Inc. was founded in 1883 and is based in Roanoke, Virginia.

About Northwest Natural Gas

Northwest Natural Holding Company, through its subsidiary, Northwest Natural Gas Company, provides regulated natural gas distribution services to residential, commercial, and industrial customers in the United States. The company operates a mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; offers natural gas asset management services; and operates an appliance retail center. It also engages in gas storage, water and wastewater, non-regulated renewable natural gas, and other investment businesses. In addition, the company provides natural gas service in Oregon and southwest Washington; and water and wastewater connections. Northwest Natural Holding Company was founded in 1859 and is headquartered in Portland, Oregon.