NextEra Energy (NYSE: NEE) and TransAlta Corporation (NYSE:TAC) are both utilities companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, valuation, dividends, earnings, institutional ownership, analyst recommendations and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
NextEra Energy 24.26% 11.88% 3.40%
TransAlta Corporation 1.67% 1.00% 0.34%

Dividends

NextEra Energy pays an annual dividend of $3.93 per share and has a dividend yield of 2.6%. TransAlta Corporation pays an annual dividend of $0.13 per share and has a dividend yield of 2.1%. NextEra Energy pays out 45.0% of its earnings in the form of a dividend. TransAlta Corporation pays out 144.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NextEra Energy has increased its dividend for 7 consecutive years. NextEra Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for NextEra Energy and TransAlta Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NextEra Energy 0 1 9 0 2.90
TransAlta Corporation 0 4 0 0 2.00

NextEra Energy currently has a consensus price target of $151.50, suggesting a potential upside of 0.89%. TransAlta Corporation has a consensus price target of $7.00, suggesting a potential upside of 12.00%. Given TransAlta Corporation’s higher possible upside, analysts plainly believe TransAlta Corporation is more favorable than NextEra Energy.

Risk & Volatility

NextEra Energy has a beta of 0.33, meaning that its stock price is 67% less volatile than the S&P 500. Comparatively, TransAlta Corporation has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500.

Earnings and Valuation

This table compares NextEra Energy and TransAlta Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
NextEra Energy $16.88 billion 4.17 $8.30 billion $8.73 17.20
TransAlta Corporation $1.91 billion 0.94 $725.42 million $0.09 69.45

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

Institutional and Insider Ownership

75.7% of NextEra Energy shares are owned by institutional investors. Comparatively, 50.6% of TransAlta Corporation shares are owned by institutional investors. 0.5% of NextEra Energy shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

NextEra Energy beats TransAlta Corporation on 14 of the 17 factors compared between the two stocks.

About NextEra Energy

NextEra Energy, Inc. (NEE) is a holding company. The Company is an electric power companies in North America and, through its subsidiary NextEra Energy Resources, LLC (NEER) and its affiliated entities, is the generator of renewable energy from the wind and sun. NEE also owns and/or operates generation, transmission and distribution facilities to support its services to retail and wholesale customers, and has investments in gas infrastructure assets. Its segments include FPL and NEER. Florida Power & Light Company (FPL) is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in Florida. NEER is a diversified clean energy company with a business strategy that emphasizes the development, acquisition and operation of long-term contracted assets with a focus on renewable projects. NEER owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.

About TransAlta Corporation

TransAlta Corporation (TransAlta) is a non-regulated electricity generation and energy marketing company with an aggregate net ownership interest of approximately 8,720 megawatts of generating capacity. The Company is engaged in the production and sale of electric energy. It focuses on generating and marketing electricity in Canada, the United States and Western Australia through its diversified portfolio of facilities fuelled by coal, natural gas, diesel, hydro, wind and solar. TransAlta is organized into eight business segments: Canadian Coal, U.S. Coal, Canadian Gas, Australian Gas, Wind and Solar, Hydro, Energy Marketing and Corporate. The Canadian Coal, U.S. Coal, Canadian Gas, Australian Gas, Wind and Solar, and Hydro segments are responsible for constructing, operating and maintaining its electrical generation. All the segments are supported by a Corporate segment, which includes the Corporation’s central financial, legal, administrative, and investing functions.

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