Otter Tail (NASDAQ: OTTR) and CEMIG (NYSE:CIG) are both utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, analyst recommendations, institutional ownership, profitability and risk.
Risk & Volatility
Otter Tail has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500. Comparatively, CEMIG has a beta of 1.84, indicating that its share price is 84% more volatile than the S&P 500.
This table compares Otter Tail and CEMIG’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
This is a breakdown of current ratings and price targets for Otter Tail and CEMIG, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Otter Tail currently has a consensus price target of $44.00, suggesting a potential downside of 9.18%. Given Otter Tail’s higher probable upside, research analysts clearly believe Otter Tail is more favorable than CEMIG.
Valuation & Earnings
This table compares Otter Tail and CEMIG’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Otter Tail||$849.35 million||2.26||$72.43 million||$1.86||26.05|
|CEMIG||$6.80 billion||N/A||$313.51 million||$0.26||7.58|
CEMIG has higher revenue and earnings than Otter Tail. CEMIG is trading at a lower price-to-earnings ratio than Otter Tail, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
42.9% of Otter Tail shares are held by institutional investors. 1.7% of Otter Tail shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Otter Tail pays an annual dividend of $1.34 per share and has a dividend yield of 2.8%. CEMIG pays an annual dividend of $0.13 per share and has a dividend yield of 6.6%. Otter Tail pays out 72.0% of its earnings in the form of a dividend. CEMIG pays out 50.0% 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. Otter Tail has increased its dividend for 4 consecutive years. CEMIG is clearly the better dividend stock, given its higher yield and lower payout ratio.
Otter Tail beats CEMIG on 9 of the 16 factors compared between the two stocks.
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.
CEMIG Company Profile
Companhia Energética de Minas Gerais, through its subsidiaries, engages in the generation, transmission, distribution, and sale of electricity in Brazil. The company generates electricity through renewable energy sources, such as water, wind, sun, and biomass; or non-renewable sources, including fossil and nuclear fuels. As of December 31, 2016, it operated hydroelectric plants, thermoelectric plants, and solar plants with a total installed capacity of approximately 8,000 megawatts in 10 states of Brazil. It is also involved in the telecommunications and energy solutions consulting businesses; exploitation of natural gas; sale and trading of electricity; and acquisition, transport, and distribution of gas and its subproducts and derivatives, as well as provision of technology systems and systems for operational management of public service concessions, including companies operating in electricity, gas, water and sewerage, and other utility companies. The company was founded in 1952 and is headquartered in Belo Horizonte, Brazil.
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