AES (NYSE:AES) versus Edison International (NYSE:EIX) Critical Analysis

Edison International (NYSE:EIX) and AES (NYSE:AES) are both large-cap utilities companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, analyst recommendations, earnings, risk and profitability.

Risk & Volatility

Edison International has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, AES has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500.

Profitability

This table compares Edison International and AES’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Edison International	19.27%	14.56%	2.87%
AES	10.78%	22.66%	3.84%

Insider and Institutional Ownership

89.0% of Edison International shares are held by institutional investors. Comparatively, 93.1% of AES shares are held by institutional investors. 1.2% of Edison International shares are held by insiders. Comparatively, 0.8% of AES shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Edison International and AES”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Edison International	$19.32 billion	1.37	$4.70 billion	$9.21	7.45
AES	$12.23 billion	0.85	$910.00 million	$1.87	7.77

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Edison International and AES, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Edison International	3	6	4	0	2.08
AES	0	8	1	0	2.11

Edison International presently has a consensus price target of $72.64, suggesting a potential upside of 5.93%. AES has a consensus price target of $15.63, suggesting a potential upside of 7.52%. Given AES’s stronger consensus rating and higher possible upside, analysts clearly believe AES is more favorable than Edison International.

Dividends

Edison International pays an annual dividend of $3.51 per share and has a dividend yield of 5.1%. AES pays an annual dividend of $0.70 per share and has a dividend yield of 4.8%. Edison International pays out 38.1% of its earnings in the form of a dividend. AES pays out 37.4% 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. Edison International has raised its dividend for 23 consecutive years and AES has raised its dividend for 12 consecutive years. Edison International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Edison International beats AES on 9 of the 17 factors compared between the two stocks.

About Edison International

Edison International, through its subsidiaries, engages in the generation and distribution of electric power. The company supplies and delivers electricity to approximately 50,000 square mile area of southern California to residential, commercial, industrial, public authorities, agricultural, and other sectors. Its transmission facilities consist of lines ranging from 55 kV to 500 kV and approximately 80 transmission substations; distribution system consists of approximately 38,000 circuit-miles of overhead lines; approximately 31,000 circuit-miles of underground lines; and 730 distribution substations. The company was founded in 1886 and is based in Rosemead, California.

About AES

The AES Corporation, together with its subsidiaries, operates as a diversified power generation and utility company in the United States and internationally. The company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market. It uses various fuels and technologies to generate electricity, such as coal, gas, hydro, wind, solar, and biomass, as well as renewables comprising energy storage and landfill gas. The company owns and/or operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers. The company was formerly known as Applied Energy Services, Inc. and changed its name to The AES Corporation in April 2000. The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.