Reviewing Southern (NYSE:SO) & Hydro One (OTCMKTS:HRNNF)

Southern (NYSE:SO) and Hydro One (OTCMKTS:HRNNF) are both large-cap utilities companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Analyst Ratings

This is a summary of current ratings for Southern and Hydro One, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southern	2	11	8	0	2.29
Hydro One	1	5	1	0	2.00

Southern presently has a consensus price target of $97.32, indicating a potential upside of 4.22%. Given Southern’s stronger consensus rating and higher possible upside, equities analysts clearly believe Southern is more favorable than Hydro One.

Dividends

Southern pays an annual dividend of $3.04 per share and has a dividend yield of 3.3%. Hydro One pays an annual dividend of $1.02 per share and has a dividend yield of 2.5%. Southern pays out 69.2% of its earnings in the form of a dividend. Hydro One pays out 59.6% 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. Southern has increased its dividend for 25 consecutive years. Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Southern and Hydro One’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southern	16.00%	13.57%	3.52%
Hydro One	14.88%	11.02%	3.56%

Earnings and Valuation

This table compares Southern and Hydro One”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southern	$29.55 billion	3.68	$4.34 billion	$4.39	21.27
Hydro One	$6.47 billion	3.76	$958.32 million	$1.71	23.70

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

Insider and Institutional Ownership

64.1% of Southern shares are held by institutional investors. 0.2% of Southern shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Southern beats Hydro One on 12 of the 16 factors compared between the two stocks.

About Southern

Southern Company is an energy holding company based in Atlanta, Georgia. Through its subsidiaries, it generates, transmits and distributes electricity and provides natural gas service, primarily across the southeastern United States. Its electric utility businesses include Alabama Power, Georgia Power and Mississippi Power, which serve customers in their respective states. Southern Company also owns Southern Power, which develops and operates wholesale power generation assets, and Southern Company Gas, whose businesses distribute natural gas to customers in several states.

About Hydro One

Hydro One is an electricity transmission and distribution utility serving communities across Ontario, Canada. The company transports electricity over high-voltage transmission lines and delivers it through local distribution networks to homes and businesses. Its activities include operating, maintaining and upgrading electricity infrastructure, as well as planning and building transmission and distribution facilities. Hydro One also provides related services to support the reliability of the province’s electricity system.