Analyzing NorthWestern (NASDAQ:NWE) and Black Hills (NYSE:BKH)

Black Hills (NYSE:BKH) and NorthWestern (NASDAQ:NWE) are both mid-cap utilities companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, dividends, profitability and risk.

Volatility and Risk

Black Hills has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500. Comparatively, NorthWestern has a beta of 0.34, meaning that its stock price is 66% less volatile than the S&P 500.

Dividends

Black Hills pays an annual dividend of $2.81 per share and has a dividend yield of 3.8%. NorthWestern pays an annual dividend of $2.68 per share and has a dividend yield of 3.8%. Black Hills pays out 71.0% of its earnings in the form of a dividend. NorthWestern pays out 96.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Black Hills has increased its dividend for 55 consecutive years and NorthWestern has increased its dividend for 21 consecutive years. Black Hills is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Black Hills and NorthWestern”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Black Hills	$2.31 billion	2.43	$291.60 million	$3.96	18.60
NorthWestern	$1.61 billion	2.71	$181.09 million	$2.77	25.66

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

Institutional & Insider Ownership

86.7% of Black Hills shares are owned by institutional investors. Comparatively, 96.1% of NorthWestern shares are owned by institutional investors. 0.6% of Black Hills shares are owned by insiders. Comparatively, 0.9% of NorthWestern 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Black Hills	13.01%	7.98%	2.93%
NorthWestern	10.13%	8.03%	2.73%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Black Hills and NorthWestern, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Black Hills	0	0	6	0	3.00
NorthWestern	0	3	3	0	2.50

Black Hills currently has a consensus target price of $81.67, indicating a potential upside of 10.87%. NorthWestern has a consensus target price of $73.30, indicating a potential upside of 3.13%. Given Black Hills’ stronger consensus rating and higher possible upside, equities analysts plainly believe Black Hills is more favorable than NorthWestern.

Summary

Black Hills beats NorthWestern on 12 of the 17 factors compared between the two stocks.

About Black Hills

Black Hills Corporation, through its subsidiaries, operates as an electric and natural gas utility company in the United States. The company operates in two segments: Electric Utilities and Gas Utilities. The Electric Utilities segment generates, transmits, and distributes electricity to approximately 222,000 electric utility customers in Colorado, Montana, South Dakota, and Wyoming; and owns and operates 1,394 megawatts of generation capacity and 9,106 miles of electric transmission and distribution lines. The Gas Utilities segment distributes natural gas to approximately 1,116,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming; owns and operates 4,663 miles of intrastate gas transmission pipelines; 42,514 miles of gas distribution mains and service lines; seven natural gas storage sites; and approximately 50,000 horsepower of compression and 516 miles of gathering lines. It also constructs and maintains customer owned gas infrastructure facilities for gas transportation customers; and provides appliance repair services to residential utility customers, as well as electrical system construction services to large industrial customers. In addition, the company produces electric power through wind, natural gas, and coal-fired generating plants; and coal at its coal mine located near Gillette, Wyoming. Black Hills Corporation was incorporated in 1941 and is headquartered in Rapid City, South Dakota.

About NorthWestern

NorthWestern Energy Group, Inc. provides electricity and natural gas to residential, commercial, and various industrial customers. It generates, purchases, transmits, and distributes electricity; and produces, purchases, stores, transmits, and distributes natural gas, as well as owns municipal franchises to provide natural gas service in the communities. The company operates 6,600 miles of electric transmission and 18,674 miles of electric distribution lines with approximately 395 transmission and distribution substations; and 2,235 miles of natural gas transmission and 5,155 miles of natural gas distribution lines with approximately 133 city gate stations in Montana. It also operates 1,310 miles of electric transmission and 2,365 miles of electric distribution lines in South Dakota with approximately 124 transmission and distribution substations; and 55 miles of natural gas transmission and 2,573 miles of natural gas distribution lines in South Dakota and Nebraska. The company provides electricity and/or natural gas to approximately 775,300 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park. NorthWestern Energy Group, Inc. was founded in 1923 and is based in Sioux Falls, South Dakota.