National Grid (NGG) & Williams Companies (WMB) Critical Analysis

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National Grid (NYSE: WMB) and Williams Companies (NYSE:WMB) are both large-cap utilities companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, risk, dividends and earnings.

Profitability

This table compares National Grid and Williams Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
National Grid N/A N/A N/A
Williams Companies 24.19% 3.82% 1.28%

Institutional & Insider Ownership

5.8% of National Grid shares are owned by institutional investors. Comparatively, 87.6% of Williams Companies shares are owned by institutional investors. 0.5% of Williams Companies shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for National Grid and Williams Companies, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
National Grid 0 4 4 0 2.50
Williams Companies 0 2 13 0 2.87

Williams Companies has a consensus target price of $33.62, suggesting a potential upside of 10.14%. Given Williams Companies’ stronger consensus rating and higher possible upside, analysts plainly believe Williams Companies is more favorable than National Grid.

Dividends

National Grid pays an annual dividend of $4.08 per share and has a dividend yield of 7.6%. Williams Companies pays an annual dividend of $1.36 per share and has a dividend yield of 4.5%. National Grid pays out 103.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Williams Companies pays out 215.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. National Grid is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares National Grid and Williams Companies’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
National Grid $20.22 billion 1.79 $4.71 billion $3.93 13.69
Williams Companies $8.03 billion 3.15 $2.17 billion $0.63 48.44

National Grid has higher revenue and earnings than Williams Companies. National Grid is trading at a lower price-to-earnings ratio than Williams Companies, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

National Grid has a beta of 0.38, meaning that its stock price is 62% less volatile than the S&P 500. Comparatively, Williams Companies has a beta of 1.43, meaning that its stock price is 43% more volatile than the S&P 500.

Summary

Williams Companies beats National Grid on 11 of the 16 factors compared between the two stocks.

National Grid Company Profile

National Grid plc transmits and distributes electricity and natural gas. It operates through UK Electricity Transmission, UK Gas Transmission, and US Regulated segments. The UK Electricity Transmission segment owns and operates electricity transmission networks, which comprise approximately 7,200 kilometers of overhead lines; 1,500 kilometers of underground cables; and 346 substations located in England and Wales. It also operates the Scottish networks. The UK Gas Transmission segment owns and operates gas transmission systems that include approximately 7,660 kilometers of high pressure pipes and 24 compressor stations connecting 8 distribution networks in Great Britain. The US Regulated segment owns and operates transmission facilities across upstate New York, Massachusetts, New Hampshire, Rhode Island, and Vermont; and electricity distribution networks in upstate New York, Massachusetts, and Rhode Island. Its assets comprise 14,293 kilometers of overhead lines; 168 kilometers of underground cables; 387 transmission substations; and 740 distribution substations. This segment also engages in owning and operating gas distribution networks in upstate New York, New York City, Long Island, Massachusetts, and Rhode Island. The company is also involved in gas metering, property management, liquefied natural gas (LNG) importation terminal, and LNG operations, as well as the operation of Great Britain-France interconnector. National Grid plc was founded in 1990 and is headquartered in London, the United Kingdom.

Williams Companies Company Profile

The Williams Cos., Inc. is an energy infrastructure company, which explores, produces, transports, sells and processes natural gas and petroleum products. It operates through three segments: Williams Partners; and Others. The Williams Partners segment includes gas pipeline and domestic midstream businesses. The gas pipeline business includes interstate natural gas pipelines and pipeline joint venture investments, and the midstream business provides natural gas gathering, treating and processing services; NGL production, fractionation, storage, marketing and transportation and deepwater production handling and crude oil transportation services. The Other segment comprises of corporate operations; olefins pipeline assets; and Canada assets. The company was founded in 1908 by David Williams and Miller Williams and is headquartered in Tulsa, OK.

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