Contrasting Ameren (NYSE:AEE) & American Electric Power (NASDAQ:AEP)

Ameren (NYSE:AEE) and American Electric Power (NASDAQ:AEP) are both large-cap utilities companies, but which is the superior investment? We will compare the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, institutional ownership, valuation and dividends.

Profitability

This table compares Ameren and American Electric Power’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ameren	17.17%	10.94%	2.99%
American Electric Power	16.29%	10.21%	2.89%

Valuation and Earnings

This table compares Ameren and American Electric Power”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ameren	$8.80 billion	3.52	$1.46 billion	$5.56	20.14
American Electric Power	$21.88 billion	3.31	$3.58 billion	$6.81	19.54

American Electric Power has higher revenue and earnings than Ameren. American Electric Power is trading at a lower price-to-earnings ratio than Ameren, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

79.1% of Ameren shares are owned by institutional investors. Comparatively, 75.2% of American Electric Power shares are owned by institutional investors. 0.3% of Ameren shares are owned by insiders. Comparatively, 0.1% of American Electric Power shares are owned by 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.

Risk and Volatility

Ameren has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Ameren and American Electric Power, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ameren	0	4	9	0	2.69
American Electric Power	0	9	13	0	2.59

Ameren presently has a consensus price target of $120.83, suggesting a potential upside of 7.89%. American Electric Power has a consensus price target of $141.71, suggesting a potential upside of 6.50%. Given Ameren’s stronger consensus rating and higher possible upside, research analysts clearly believe Ameren is more favorable than American Electric Power.

Dividends

Ameren pays an annual dividend of $3.00 per share and has a dividend yield of 2.7%. American Electric Power pays an annual dividend of $3.80 per share and has a dividend yield of 2.9%. Ameren pays out 54.0% 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. Ameren has raised its dividend for 12 consecutive years and American Electric Power has raised its dividend for 15 consecutive years. American Electric Power is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Ameren beats American Electric Power on 10 of the 17 factors compared between the two stocks.

About Ameren

Ameren Corporation, together with its subsidiaries, operates as a public utility holding company in the United States. The company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. It engages in the rate-regulated electric generation, transmission, and distribution activities; and rate-regulated natural gas distribution business. In addition, the company generates electricity through coal, nuclear, and natural gas, as well as renewable sources, such as hydroelectric, wind, methane gas, and solar. It serves residential, commercial, and industrial customers. The company was founded in 1881 and is headquartered in Saint Louis, Missouri.

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.