Critical Review: WEC Energy Group (NYSE:WEC) and American Electric Power (NASDAQ:AEP)

American Electric Power (NASDAQ:AEP) and WEC Energy Group (NYSE:WEC) are both large-cap utilities companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, risk, valuation and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for American Electric Power and WEC Energy Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Electric Power	0	9	13	0	2.59
WEC Energy Group	1	8	8	1	2.50

American Electric Power presently has a consensus price target of $136.81, indicating a potential upside of 2.36%. WEC Energy Group has a consensus price target of $120.73, indicating a potential upside of 4.26%. Given WEC Energy Group’s higher possible upside, analysts plainly believe WEC Energy Group is more favorable than American Electric Power.

Insider and Institutional Ownership

75.2% of American Electric Power shares are held by institutional investors. Comparatively, 77.2% of WEC Energy Group shares are held by institutional investors. 0.1% of American Electric Power shares are held by insiders. Comparatively, 0.5% of WEC Energy Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares American Electric Power and WEC Energy Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Electric Power	$21.88 billion	3.32	$3.58 billion	$6.70	19.95
WEC Energy Group	$9.80 billion	3.85	$1.56 billion	$4.83	23.98

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

Dividends

American Electric Power pays an annual dividend of $3.80 per share and has a dividend yield of 2.8%. WEC Energy Group pays an annual dividend of $3.81 per share and has a dividend yield of 3.3%. American Electric Power pays out 56.7% of its earnings in the form of a dividend. WEC Energy Group pays out 78.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Electric Power has raised its dividend for 15 consecutive years and WEC Energy Group has raised its dividend for 23 consecutive years. WEC Energy Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

American Electric Power has a beta of 0.58, indicating that its stock price is 42% less volatile than the S&P 500. Comparatively, WEC Energy Group has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500.

Profitability

This table compares American Electric Power and WEC Energy Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Electric Power	16.37%	10.46%	2.92%
WEC Energy Group	15.90%	12.40%	3.45%

Summary

WEC Energy Group beats American Electric Power on 10 of the 18 factors compared between the two stocks.

About American Electric Power

American Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, renewable, nuclear, hydro, solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. American Electric Power Company, Inc. was incorporated in 1906 and is headquartered in Columbus, Ohio.

About WEC Energy Group

WEC Energy Group, Inc., through its subsidiaries, provides regulated natural gas and electricity, and renewable and nonregulated renewable energy services in the United States. It operates through Wisconsin, Illinois, Other States, Electric Transmission, and Non-Utility Energy Infrastructure segments. The company generates and distributes electricity from coal, natural gas, oil, and nuclear, as well as renewable energy resources, including wind, solar, hydroelectric, and biomass; and distributes and transports natural gas. It also owns, maintains, monitors, and operates electric transmission systems; and generates, distributes, and sells steam. As of December 31, 2023, the company operated approximately 35,500 miles of overhead distribution lines and 36,500 miles of underground distribution cables, as well as 430 electric distribution substations and 523,700 line transformers; approximately 46,400 miles of natural gas distribution mains; 1,700 miles of natural gas transmission mains; 2.4 million natural gas lateral services; 490 natural gas distribution and transmission gate stations; and 69.3 billion cubic feet of working gas capacities in underground natural gas storage fields. The company was formerly known as Wisconsin Energy Corporation and changed its name to WEC Energy Group, Inc. in June 2015. WEC Energy Group, Inc. was founded in 1896 and is headquartered in Milwaukee, Wisconsin.