Southern (NYSE:SO) and Otter Tail (NASDAQ:OTTR) are both utilities companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, earnings, risk, analyst recommendations, valuation and institutional ownership.
Institutional & Insider Ownership
56.5% of Southern shares are owned by institutional investors. Comparatively, 43.0% of Otter Tail shares are owned by institutional investors. 0.7% of Southern shares are owned by insiders. Comparatively, 1.7% of Otter Tail shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
This table compares Southern and Otter Tail’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Southern pays an annual dividend of $2.40 per share and has a dividend yield of 5.1%. Otter Tail pays an annual dividend of $1.34 per share and has a dividend yield of 2.8%. Southern pays out 79.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Otter Tail pays out 72.0% of its earnings in the form of a dividend. Southern has increased its dividend for 17 consecutive years and Otter Tail has increased its dividend for 5 consecutive years. Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a summary of current recommendations and price targets for Southern and Otter Tail, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Southern currently has a consensus price target of $45.85, indicating a potential downside of 1.64%. Otter Tail has a consensus price target of $42.00, indicating a potential downside of 11.56%. Given Southern’s stronger consensus rating and higher probable upside, analysts plainly believe Southern is more favorable than Otter Tail.
Valuation & Earnings
This table compares Southern and Otter Tail’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Southern||$23.03 billion||2.08||$880.00 million||$3.02||15.43|
|Otter Tail||$849.35 million||2.22||$72.43 million||$1.86||25.53|
Southern has higher revenue and earnings than Otter Tail. Southern is trading at a lower price-to-earnings ratio than Otter Tail, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Southern has a beta of 0.07, meaning that its stock price is 93% less volatile than the S&P 500. Comparatively, Otter Tail has a beta of 0.48, meaning that its stock price is 52% less volatile than the S&P 500.
Southern beats Otter Tail on 10 of the 16 factors compared between the two stocks.
Southern Company Profile
The Southern Company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity. The company also constructs, acquires, owns, and manages power generation assets, including renewable energy facilities and sells electricity in the wholesale market; and distributes natural gas in Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland, as well as provides gas marketing services, wholesale gas services, and gas midstream operations. It owns and/or operates 33 hydroelectric generating stations, 29 fossil fuel generating stations, 3 nuclear generating stations, 15 combined cycle/cogeneration stations, 35 solar facilities, 8 wind facilities, 1 biomass facility, and 1 landfill gas facility; and constructs, operates, and maintains 82,000 miles of natural gas pipelines and 14 storage facilities with total capacity of 158 Bcf to provide natural gas to residential, commercial, and industrial customers. The company has 46,000 megawatts of generating capacity and 1,500 billion cubic feet of combined natural gas consumption and throughput volume serving 9 million electric and gas utility customers. It also provides products and services in the areas of distributed generation infrastructure, energy efficiency, and utility infrastructure. In addition, the company offers digital wireless communications services with various communication options, including push to talk, cellular service, text messaging, wireless Internet access, and wireless data. The Southern Company was founded in 1945 and is headquartered in Atlanta, Georgia.
Otter Tail Company Profile
Otter Tail Corporation, together with its subsidiaries, engages in electric, manufacturing, and plastics businesses in the United States. The company's Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator, Inc. markets. This segment generates electricity through coal, wind and hydro, and natural gas and oil sources. It serves approximately 130,000 residential, commercial, industrial, and other customers. Otter Tail Corporation's Manufacturing segment stamps, fabricates, welds, paints, and laser cuts metal components for use in the recreational vehicle, agricultural, oil and gas, lawn and garden, industrial equipment, health and fitness, and enclosure industries; manufactures and fabricates parts for off-road equipment, mining machinery, oil fields and offshore oil rigs, wind industry components, broadcast antennae, and farm equipment; and provides laser cutting services and stamping to weldments and assemblies for metal fabrication buyers and original equipment manufacturers. It also manufactures and sells thermoformed products for the horticulture industry; and clamshell packing, blister packs, returnable pallets, and handling trays for shipping and storing odd-shaped or difficult-to-handle parts for customers in the medical and life sciences, industrial, recreation, and electronics industries. The company's Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage system, and other uses. This segment markets its products to wholesalers and distributors through independent sales representatives, company salespersons, and customer service representatives. The company was formerly known as Otter Tail Power Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is headquartered in Fergus Falls, Minnesota.
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