Avista Corporation (NYSE: AVA) and CMS Energy Corporation (NYSE:CMS) are both mid-cap utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, earnings, dividends, risk and valuation.

Analyst Recommendations

This is a breakdown of recent ratings for Avista Corporation and CMS Energy Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Avista Corporation 1 3 0 0 1.75
CMS Energy Corporation 0 4 4 0 2.50

Avista Corporation presently has a consensus price target of $44.00, suggesting a potential downside of 14.06%. CMS Energy Corporation has a consensus price target of $47.71, suggesting a potential downside of 1.76%. Given CMS Energy Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe CMS Energy Corporation is more favorable than Avista Corporation.

Profitability

This table compares Avista Corporation and CMS Energy Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Avista Corporation 9.35% 8.19% 2.57%
CMS Energy Corporation 8.52% 12.98% 2.64%

Insider & Institutional Ownership

69.7% of Avista Corporation shares are held by institutional investors. Comparatively, 87.5% of CMS Energy Corporation shares are held by institutional investors. 1.1% of Avista Corporation shares are held by insiders. Comparatively, 0.7% of CMS Energy Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Avista Corporation pays an annual dividend of $1.43 per share and has a dividend yield of 2.8%. CMS Energy Corporation pays an annual dividend of $1.33 per share and has a dividend yield of 2.7%. Avista Corporation pays out 67.8% of its earnings in the form of a dividend. CMS Energy Corporation pays out 66.8% 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. Avista Corporation has increased its dividend for 14 consecutive years and CMS Energy Corporation has increased its dividend for 5 consecutive years. Avista Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Avista Corporation and CMS Energy Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Avista Corporation $1.46 billion 2.26 $471.76 million $2.11 24.27
CMS Energy Corporation $6.51 billion 2.10 $2.06 billion $1.99 24.41

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

Risk & Volatility

Avista Corporation has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500. Comparatively, CMS Energy Corporation has a beta of 0.16, meaning that its share price is 84% less volatile than the S&P 500.

Summary

CMS Energy Corporation beats Avista Corporation on 9 of the 17 factors compared between the two stocks.

Avista Corporation Company Profile

Avista Corporation is an electric and natural gas utility company. The Company operates through two segments: Avista Utilities, and Alaska Electric Light and Power Company (AEL&P). The Company’s regional services include government and higher education, medical services, retail trade and finance. The Company’s businesses also include sheet metal fabrication, venture fund investments, real estate investments, a company that explores markets that could be served with liquefied natural gas (LNG), as well as certain other investments of Avista Capital, which is a subsidiary of the Company. Avista Utilities is an operating division of the Company, which consists of its regulated utility operations in the Pacific Northwest. Avista Utilities division generates, transmits and distributes electricity, and distributes natural gas. As of December 31, 2016, AEL&P operated five hydroelectric generation facilities with 102.7 megawatts (MW) of hydroelectric generation capacity.

CMS Energy Corporation Company Profile

CMS Energy Corporation is an energy company operating primarily in Michigan. The Company operates through three segments: electric utility, which consists of regulated activities associated with the generation, transmission and distribution of electricity in Michigan; gas utility, which consists of regulated activities associated with the transportation, storage and distribution of natural gas in Michigan, and enterprises, which consists of various subsidiaries engaging primarily in domestic independent power production. The Company is the parent holding company of various subsidiaries, including Consumers Energy Company (Consumers), an electric and gas utility company, and CMS Enterprises Company (CMS Enterprises), a domestic independent power producer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a group of other industries.

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