Analyzing CMS Energy (NYSE:CMS) & NextEra Energy (NYSE:NEE)

NextEra Energy (NYSE:NEE) and CMS Energy (NYSE:CMS) are both large-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, profitability, risk, institutional ownership and earnings.

Insider & Institutional Ownership

78.7% of NextEra Energy shares are owned by institutional investors. Comparatively, 93.6% of CMS Energy shares are owned by institutional investors. 0.2% of NextEra Energy shares are owned by insiders. Comparatively, 0.5% of CMS Energy shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

NextEra Energy pays an annual dividend of $2.27 per share and has a dividend yield of 2.7%. CMS Energy pays an annual dividend of $2.17 per share and has a dividend yield of 3.0%. NextEra Energy pays out 72.3% of its earnings in the form of a dividend. CMS Energy pays out 62.7% 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. NextEra Energy has raised its dividend for 31 consecutive years and CMS Energy has raised its dividend for 3 consecutive years. CMS Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current recommendations and price targets for NextEra Energy and CMS Energy, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NextEra Energy	0	4	12	2	2.89
CMS Energy	1	5	8	0	2.50

NextEra Energy currently has a consensus target price of $91.94, suggesting a potential upside of 7.64%. CMS Energy has a consensus target price of $77.42, suggesting a potential upside of 8.29%. Given CMS Energy’s higher probable upside, analysts plainly believe CMS Energy is more favorable than NextEra Energy.

Risk and Volatility

NextEra Energy has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500. Comparatively, CMS Energy has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
NextEra Energy	24.72%	12.42%	3.88%
CMS Energy	12.62%	12.10%	2.88%

Valuation and Earnings

This table compares NextEra Energy and CMS Energy”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NextEra Energy	$24.75 billion	7.19	$6.95 billion	$3.14	27.20
CMS Energy	$7.52 billion	2.89	$1.00 billion	$3.46	20.66

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

Summary

NextEra Energy beats CMS Energy on 12 of the 18 factors compared between the two stocks.

About NextEra Energy

NextEra Energy, Inc., through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear,natural gas, and other clean energy. It also develops, constructs, and operates long-term contracted assets that consists of clean energy solutions, such as renewable generation facilities, battery storage projects, and electric transmission facilities; sells energy commodities; and owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets. The company had approximately 33,276 megawatts of net generating capacity; approximately 90,000 circuit miles of transmission and distribution lines; and 883 substations. It serves approximately 12 million people through approximately 5.9 million customer accounts in the east and lower west coasts of Florida. The company was formerly known as FPL Group, Inc. and changed its name to NextEra Energy, Inc. in 2010. NextEra Energy, Inc. was founded in 1925 and is headquartered in Juno Beach, Florida.

About CMS Energy

CMS Energy Corporation operates as an energy company primarily in Michigan. The company operates through three segments: Electric Utility; Gas Utility; and Enterprises. The Electric Utility segment is involved in the generation, purchase, transmission, distribution, and sale of electricity. This segment generates electricity through coal, wind, gas, renewable energy, oil, and nuclear sources. Its distribution system comprises 208 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,428 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 82,474 miles of electric distribution overhead lines; 9,395 miles of underground distribution lines; 1,093 substations; and 3 battery facilities. The Gas Utility segment engages in the purchase, transmission, storage, distribution, and sale of natural gas, which includes 2,392 miles of transmission lines; 15 gas storage fields; 28,065 miles of distribution mains; and 8 compressor stations. The Enterprises segment is involved in the independent power production and marketing, including the development and operation of renewable generation. It serves 1.9 million electric and 1.8 million gas customers, including residential, commercial, and diversified industrial customers. The company was incorporated in 1987 and is headquartered in Jackson, Michigan.