Critical Comparison: NRG Energy (NYSE:NRG) & NiSource (NYSE:NI)

NiSource (NYSE:NI) and NRG Energy (NYSE:NRG) are both large-cap utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for NiSource and NRG Energy, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NiSource	0	3	7	1	2.82
NRG Energy	0	4	10	1	2.80

NiSource presently has a consensus target price of $50.33, suggesting a potential upside of 8.00%. NRG Energy has a consensus target price of $199.69, suggesting a potential upside of 54.49%. Given NRG Energy’s higher possible upside, analysts plainly believe NRG Energy is more favorable than NiSource.

Institutional and Insider Ownership

91.6% of NiSource shares are owned by institutional investors. Comparatively, 97.7% of NRG Energy shares are owned by institutional investors. 0.4% of NiSource shares are owned by company insiders. Comparatively, 0.4% of NRG Energy shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares NiSource and NRG Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NiSource	14.15%	8.31%	2.70%
NRG Energy	0.74%	70.67%	4.95%

Earnings and Valuation

This table compares NiSource and NRG Energy”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NiSource	$6.82 billion	3.28	$929.50 million	$2.01	23.19
NRG Energy	$30.71 billion	0.89	$864.00 million	$0.85	152.07

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

Dividends

NiSource pays an annual dividend of $1.20 per share and has a dividend yield of 2.6%. NRG Energy pays an annual dividend of $1.90 per share and has a dividend yield of 1.5%. NiSource pays out 59.7% of its earnings in the form of a dividend. NRG Energy pays out 223.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NiSource has raised its dividend for 14 consecutive years and NRG Energy has raised its dividend for 1 consecutive years. NiSource is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

NiSource has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, NRG Energy has a beta of 1.25, suggesting that its stock price is 25% more volatile than the S&P 500.

Summary

NRG Energy beats NiSource on 9 of the 17 factors compared between the two stocks.

About NiSource

NiSource Inc., an energy holding company, operates as a regulated natural gas and electric utility company in the United States. It operates in two segments, Gas Distribution Operations and Electric Operations. The company distributes natural gas to approximately 3.3 million customers through approximately 55,000 miles of distribution main pipeline and the associated individual customer service lines; and 1,000 miles of transmission main pipeline in northern Indiana, Ohio, Pennsylvania, Virginia, Kentucky, and Maryland. It also generates, transmits, and distributes electricity to approximately 0.5 million customers in various counties in the northern part of Indiana, as well as engages in wholesale electric and transmission transactions. It owns and operates coal-fired electric generating stations in Wheatfield and Michigan City; combined cycle gas turbine in West Terre Haute; natural gas generating units in Wheatfield; hydro generating plants in Carroll County and White County; wind generating units in White County, Indiana; and solar generating units in Jasper County and White County. The company was formerly known as NIPSCO Industries, Inc. and changed its name to NiSource Inc. in April 1999. NiSource Inc. was founded in 1847 and is headquartered in Merrillville, Indiana.

About NRG Energy

NRG Energy, Inc., together with its subsidiaries, operates as an energy and home services company in the United States and Canada. It operates through Texas; East; West/Services/Other; Vivint Smart Home; and Corporate Activities segments. The company produces and sells electricity generated using coal, oil, solar, and battery storage; natural gas; and a cloud-based home platform, including hardware, software, sales, installation, customer service, technical support, and professional monitoring solutions. It offers retail electricity and energy management, line and surge protection products, HVAC installation, repair and maintenance, home protection products, carbon offsets, back-up power stations, portable power, portable solar, and portable lighting; retail services comprising demand response, commodity sales, energy efficiency, and energy management solutions; and system power, distributed generation, renewable and low-carbon products, carbon management and specialty services, backup generation, storage and distributed solar, and energy advisory services. In addition, the company trades in power, natural gas, and related commodities; environmental products; weather products; and financial products, including forwards, futures, options, and swaps. It offers its products and services under the NRG, Reliant, Direct Energy, Green Mountain Energy, and Vivint. It serves residential, commercial, government, industrial, and wholesale customers. NRG Energy, Inc. was founded in 1989 and is headquartered in Houston, Texas.