Reviewing NorthWestern (NWE) & CMS Energy (CMS)

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NorthWestern (NYSE: NWE) and CMS Energy (NYSE:CMS) are both utilities companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Dividends

NorthWestern pays an annual dividend of $2.20 per share and has a dividend yield of 3.9%. CMS Energy pays an annual dividend of $1.43 per share and has a dividend yield of 3.2%. NorthWestern pays out 66.7% of its earnings in the form of a dividend. CMS Energy pays out 65.9% 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. NorthWestern has increased its dividend for 9 consecutive years and CMS Energy has increased its dividend for 6 consecutive years. NorthWestern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for NorthWestern and CMS Energy, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NorthWestern 3 1 1 0 1.60
CMS Energy 0 6 6 0 2.50

NorthWestern currently has a consensus price target of $54.75, indicating a potential downside of 2.41%. CMS Energy has a consensus price target of $47.73, indicating a potential upside of 5.29%. Given CMS Energy’s stronger consensus rating and higher possible upside, analysts plainly believe CMS Energy is more favorable than NorthWestern.

Volatility and Risk

NorthWestern has a beta of 0.22, meaning that its stock price is 78% less volatile than the S&P 500. Comparatively, CMS Energy has a beta of 0.08, meaning that its stock price is 92% less volatile than the S&P 500.

Earnings and Valuation

This table compares NorthWestern and CMS Energy’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NorthWestern $1.31 billion 2.13 $162.70 million $3.30 17.00
CMS Energy $6.58 billion 1.95 $460.00 million $2.17 20.89

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

Profitability

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

Net Margins Return on Equity Return on Assets
NorthWestern 12.86% 9.38% 3.01%
CMS Energy 7.48% 14.33% 2.90%

Insider and Institutional Ownership

93.6% of NorthWestern shares are held by institutional investors. Comparatively, 88.3% of CMS Energy shares are held by institutional investors. 1.4% of NorthWestern shares are held by insiders. Comparatively, 0.7% of CMS Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

NorthWestern beats CMS Energy on 9 of the 17 factors compared between the two stocks.

About NorthWestern

NorthWestern Corporation, doing business as NorthWestern Energy, provides electricity and natural gas to residential, commercial, and industrial customers. The company operates through Electric Operations and Natural Gas Operations segments. It generates, transmits, and distributes electricity; and produces, stores, transmits, and distributes natural gas, as well as owns municipal franchises to provide natural gas service in the communities. The company's electric transmission and distribution network consists of approximately 24,660 miles of overhead and underground transmission and distribution lines, as well as 385 transmission and distribution substations in Montana; and transmission and distribution network comprises of approximately 3,560 miles of overhead and underground transmission and distribution lines, as well as 126 substations in South Dakota. Its natural gas transmission system consists of approximately 2,100 miles of pipeline. The company serves approximately 718,300 customers in Montana, South Dakota, and Nebraska, the United States. NorthWestern Corporation was founded in 1923 and is based in Sioux Falls, South Dakota.

About CMS Energy

CMS Energy Corporation operates as an energy company primarily in Michigan. It operates through three segments: Electric Utility, Gas Utility, and Enterprises. The Electric Utility segment engages in the generation, purchase, transmission, distribution, and sale of electricity. It generates electricity through fossil-fuel-fired plants, as well as renewable energy and nuclear sources. This segment's transmission and distribution system includes 214 miles of transmission overhead lines; 188 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,431 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 56,098 miles of electric distribution overhead lines; 10,665 miles of underground distribution lines; and substations. The Gas Utility segment is involved in the purchase, transmission, storage, distribution, and sale of natural gas. This segment's gas transmission, storage, and distribution system comprises 1,672 miles of transmission lines; 15 gas storage fields; 28,194 miles of distribution mains; and 8 compressor stations. The Enterprises segment engages in the independent power production and marketing activities; and development of renewable generation. This segment owns interests in independent power plants totaling 1,203 megawatts. The company also operates an industrial bank providing unsecured consumer installment loans for financing home improvements. It serves 1.8 million electric customers and 1.8 million gas customers, including residential, commercial, and diversified industrial customers in Michigan's Lower Peninsula. CMS Energy Corporation was founded in 1987 and is headquartered in Jackson, Michigan.

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