MGE Energy (NASDAQ:MGEE – Get Free Report) and American Electric Power (NASDAQ:AEP – Get Free Report) are both utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, earnings, analyst recommendations, valuation, dividends and institutional ownership.
Dividends
MGE Energy pays an annual dividend of $1.90 per share and has a dividend yield of 2.5%. American Electric Power pays an annual dividend of $3.80 per share and has a dividend yield of 2.9%. MGE Energy pays out 48.7% of its earnings in the form of a dividend. American Electric Power pays out 55.8% 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. MGE Energy has raised its dividend for 49 consecutive years and American Electric Power has raised its dividend for 15 consecutive years.
Valuation and Earnings
This table compares MGE Energy and American Electric Power”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| MGE Energy | $743.65 million | 3.82 | $135.89 million | $3.90 | 19.79 |
| American Electric Power | $21.88 billion | 3.29 | $3.58 billion | $6.81 | 19.44 |
American Electric Power has higher revenue and earnings than MGE Energy. American Electric Power is trading at a lower price-to-earnings ratio than MGE Energy, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
MGE Energy has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.
Analyst Ratings
This is a summary of current recommendations and price targets for MGE Energy and American Electric Power, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| MGE Energy | 1 | 1 | 1 | 0 | 2.00 |
| American Electric Power | 0 | 9 | 13 | 0 | 2.59 |
MGE Energy currently has a consensus target price of $75.50, suggesting a potential downside of 2.18%. American Electric Power has a consensus target price of $140.86, suggesting a potential upside of 6.41%. Given American Electric Power’s stronger consensus rating and higher possible upside, analysts clearly believe American Electric Power is more favorable than MGE Energy.
Profitability
This table compares MGE Energy and American Electric Power’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| MGE Energy | 18.61% | 10.94% | 4.68% |
| American Electric Power | 16.29% | 10.21% | 2.89% |
Institutional & Insider Ownership
52.6% of MGE Energy shares are held by institutional investors. Comparatively, 75.2% of American Electric Power shares are held by institutional investors. 0.4% of MGE Energy shares are held by company insiders. Comparatively, 0.1% of American Electric Power shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Summary
MGE Energy beats American Electric Power on 9 of the 17 factors compared between the two stocks.
About MGE Energy
MGE Energy, Inc., through its subsidiaries, operates as a public utility holding company primarily in the United States. It operates through Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other segments. The company generates, purchases, and distributes electricity and natural gas in Wisconsin and Iowa; owns and leases electric generating capacity; and plans, constructs, operates, maintains, and expands transmission facilities to provide transmission power services. It generates electricity from coal-fired, gas-fired, and renewable energy sources. As of December 31, 2023, the company owned and operated 835 miles of overhead electric distribution lines; 1,330 miles of underground electric distribution cables; 49 substations with an installed capacity of 1.2 million kVA; and gas facilities, including 3,066 miles of distribution mains, as well as supplied electric service to approximately 163,000 customers. MGE Energy, Inc. founded in 2001 and is headquartered in Madison, Wisconsin.
About American Electric Power
American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, renewable, nuclear, hydro, solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. American Electric Power Company, Inc. was incorporated in 1906 and is headquartered in Columbus, Ohio.
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