Critical Contrast: DCP Midstream (DCP) versus Williams Partners (WPZ)

DCP Midstream (NYSE:DCP) and Williams Partners (NYSE:WPZ) are both oils/energy companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, profitability, institutional ownership and earnings.

Dividends

DCP Midstream pays an annual dividend of $3.12 per share and has a dividend yield of 7.7%. Williams Partners pays an annual dividend of $2.52 per share and has a dividend yield of 5.3%. DCP Midstream pays out 588.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Williams Partners pays out 152.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares DCP Midstream and Williams Partners’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DCP Midstream $8.46 billion 0.69 $229.00 million $0.53 76.87
Williams Partners $8.01 billion 5.78 $871.00 million $1.65 28.71

Williams Partners has lower revenue, but higher earnings than DCP Midstream. Williams Partners is trading at a lower price-to-earnings ratio than DCP Midstream, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and price targets for DCP Midstream and Williams Partners, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DCP Midstream 2 3 6 0 2.36
Williams Partners 0 5 9 0 2.64

DCP Midstream presently has a consensus price target of $45.20, suggesting a potential upside of 10.95%. Williams Partners has a consensus price target of $44.51, suggesting a potential downside of 6.05%. Given DCP Midstream’s higher possible upside, research analysts clearly believe DCP Midstream is more favorable than Williams Partners.

Volatility & Risk

DCP Midstream has a beta of 2.32, meaning that its stock price is 132% more volatile than the S&P 500. Comparatively, Williams Partners has a beta of 1.65, meaning that its stock price is 65% more volatile than the S&P 500.

Institutional & Insider Ownership

55.1% of DCP Midstream shares are owned by institutional investors. Comparatively, 22.3% of Williams Partners shares are owned by institutional investors. 0.0% of DCP Midstream shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares DCP Midstream and Williams Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DCP Midstream 1.84% 3.07% 1.52%
Williams Partners 8.49% 5.99% 3.08%

Summary

Williams Partners beats DCP Midstream on 9 of the 16 factors compared between the two stocks.

DCP Midstream Company Profile

DCP Midstream, LP, together with its subsidiaries, owns, operates, acquires, and develops a portfolio of midstream energy assets in the United States. The company operates in two segments, Gathering and Processing, and Logistics and Marketing. The Gathering and Processing segment is involved in gathering, compressing, treating, and processing natural gas; producing and fractionating natural gas liquids (NGLs); and recovering condensate. The Logistics and Marketing segment engages in transporting, trading, marketing, and storing natural gas and NGLs; fractionating NGLs; and wholesale propane logistics. As of February 13, 2018, it owned and operated approximately 60 plants and 63,000 miles of natural gas and NGLs pipelines with operations in 17 states. The company serves petrochemical and refining companies, and retail propane distributors. DCP Midstream GP, LP serves as the general partner of the company. The company was formerly known as DCP Midstream Partners, LP and changed its name to DCP Midstream, LP in January 2017. DCP Midstream, LP was founded in 2005 and is headquartered in Denver, Colorado.

Williams Partners Company Profile

Williams Partners L.P. operates as an energy infrastructure company. It operates through Northeast G&P, Atlantic-Gulf, and West segments. The Northeast G&P segment engages in natural gas gathering, compression, processing, and NGL fractionation businesses in the Marcellus and Utica shale regions in Pennsylvania, West Virginia, New York, and Ohio. The Atlantic-Gulf segment operates Transco interstate natural gas pipeline that extends from the Gulf of Mexico to the eastern seaboard; and natural gas gathering, processing and treating, crude oil production handling, and NGL fractionation assets within the onshore, offshore shelf, and deep-water areas in and around the Gulf Coast states of Texas, Louisiana, Mississippi, and Alabama. This segment also operates various petrochemical and feedstock pipelines in the Gulf Coast region. The West segment operates Northwest Pipeline, an interstate natural gas pipeline, as well as natural gas gathering, processing, and treating assets in Colorado, New Mexico, Wyoming, Louisiana, Texas, Arkansas, and Oklahoma. This segment also operates NGL and natural gas marketing business, and storage facilities. The company owns and operates 33,000 miles of pipelines system providing natural gas for clean-power generation, heating, and industrial use. WPZ GP LLC serves as the general partner of the company. The company was founded in 2005 and is based in Tulsa, Oklahoma. Williams Partners L.P. is a subsidiary of Williams Gas Pipeline Company, LLC.

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