Suburban Propane Partners, L.P. (NYSE: SPH) and Midcoast Energy Partners (NYSE:MEP) are both oils/energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, dividends, risk, valuation, earnings and institutional ownership.

Profitability

This table compares Suburban Propane Partners, L.P. and Midcoast Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Suburban Propane Partners, L.P. 2.46% 4.09% 1.25%
Midcoast Energy Partners -5.25% -34.51% -2.64%

Dividends

Suburban Propane Partners, L.P. pays an annual dividend of $3.55 per share and has a dividend yield of 14.5%. Midcoast Energy Partners pays an annual dividend of $1.43 per share and has a dividend yield of 18.0%. Suburban Propane Partners, L.P. pays out 788.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Midcoast Energy Partners pays out -81.2% of its earnings in the form of a dividend. Suburban Propane Partners, L.P. has raised its dividend for 2 consecutive years and Midcoast Energy Partners has raised its dividend for 2 consecutive years. Midcoast Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current recommendations and price targets for Suburban Propane Partners, L.P. and Midcoast Energy Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Suburban Propane Partners, L.P. 1 1 1 0 2.00
Midcoast Energy Partners 0 1 0 0 2.00

Suburban Propane Partners, L.P. currently has a consensus price target of $27.33, indicating a potential upside of 11.52%. Midcoast Energy Partners has a consensus price target of $8.00, indicating a potential upside of 0.63%. Given Suburban Propane Partners, L.P.’s higher probable upside, research analysts clearly believe Suburban Propane Partners, L.P. is more favorable than Midcoast Energy Partners.

Earnings and Valuation

This table compares Suburban Propane Partners, L.P. and Midcoast Energy Partners’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Suburban Propane Partners, L.P. $1.15 billion 1.30 $229.21 million $0.45 54.47
Midcoast Energy Partners N/A N/A N/A ($1.76) -4.52

Suburban Propane Partners, L.P. has higher revenue and earnings than Midcoast Energy Partners. Midcoast Energy Partners is trading at a lower price-to-earnings ratio than Suburban Propane Partners, L.P., indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Suburban Propane Partners, L.P. has a beta of 0.65, meaning that its stock price is 35% less volatile than the S&P 500. Comparatively, Midcoast Energy Partners has a beta of 2.53, meaning that its stock price is 153% more volatile than the S&P 500.

Institutional and Insider Ownership

25.6% of Suburban Propane Partners, L.P. shares are owned by institutional investors. Comparatively, 64.7% of Midcoast Energy Partners shares are owned by institutional investors. 0.6% of Suburban Propane Partners, L.P. shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Suburban Propane Partners, L.P. beats Midcoast Energy Partners on 8 of the 12 factors compared between the two stocks.

Suburban Propane Partners, L.P. Company Profile

Suburban Propane Partners, L.P. is a marketer and distributor of a range of products. The Company specializes in the distribution of propane, fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. The Company’s segments include Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, and All Other. In support of its marketing and distribution operations, the Company installs and services a range of home comfort equipment, particularly in the areas of heating and ventilation. The Company conducts its business through Suburban Propane, L.P., which operates its propane business and assets (the Operating Partnership), and its direct and indirect subsidiaries. As of September 24, 2016, it had sold approximately 414.8 million gallons of propane and 30.9 million gallons of fuel oil and refined fuels to retail customers. The Company owns and operates a propane storage facility in Elk Grove, California.

Midcoast Energy Partners Company Profile

Midcoast Energy Partners, L.P. (MEP) is a limited partnership company that is engaged in the natural gas and natural gas liquids (NGL) midstream business. It operates through two segments: Gathering, Processing and Transportation, and Logistics and Marketing. It also provides marketing services of natural gas and NGLs to wholesale customers. The Company’s gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business. The Company holds interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities.

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