Comparing ALLETE (ALE) & CMS Energy (CMS)

ALLETE (NYSE: ALE) and CMS Energy (NYSE:CMS) are both utilities companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Insider and Institutional Ownership

73.1% of ALLETE shares are held by institutional investors. Comparatively, 89.1% of CMS Energy shares are held by institutional investors. 0.4% of ALLETE shares are held by insiders. Comparatively, 0.7% of CMS Energy shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and price targets for ALLETE and CMS Energy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ALLETE 1 5 0 0 1.83
CMS Energy 0 6 4 0 2.40

ALLETE currently has a consensus target price of $71.75, suggesting a potential downside of 7.11%. CMS Energy has a consensus target price of $48.44, suggesting a potential upside of 0.15%. Given CMS Energy’s stronger consensus rating and higher possible upside, analysts plainly believe CMS Energy is more favorable than ALLETE.

Dividends

ALLETE pays an annual dividend of $2.24 per share and has a dividend yield of 2.9%. CMS Energy pays an annual dividend of $1.43 per share and has a dividend yield of 3.0%. ALLETE pays out 70.2% of its earnings in the form of a dividend. CMS Energy pays out 65.9% 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. ALLETE has increased its dividend for 7 consecutive years and CMS Energy has increased its dividend for 6 consecutive years. CMS Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares ALLETE and CMS Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ALLETE $1.42 billion 2.80 $172.20 million $3.19 24.21
CMS Energy $6.58 billion 2.08 $460.00 million $2.17 22.29

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

Profitability

This table compares ALLETE and CMS Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ALLETE 12.02% 8.04% 3.30%
CMS Energy 8.13% 15.14% 3.05%

Risk and Volatility

ALLETE has a beta of 0.3, meaning that its stock price is 70% less volatile than the S&P 500. Comparatively, CMS Energy has a beta of 0.06, meaning that its stock price is 94% less volatile than the S&P 500.

Summary

CMS Energy beats ALLETE on 10 of the 17 factors compared between the two stocks.

ALLETE Company Profile

ALLETE, Inc. operates as an energy company. The company operates through three segments: Regulated Operations, ALLETE Clean Energy, and U.S. Water Services. It generates electricity from coal-fired, natural gas-fired, biomass co-fired, hydroelectric, wind, solar, and other sources. The company provides regulated electric, natural gas, and water services in northwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers, and 10,000 water customers, as well as regulated utility electric services in northeastern Minnesota to approximately 145,000 retail customers and 16 non-affiliated municipal customers. It also owns and maintains electric transmission assets in Wisconsin, Michigan, Minnesota, and Illinois. In addition, the company focuses on developing, acquiring, and operating clean and renewable energy projects; and owns and operates approximately 535 megawatt of wind energy generation. Further, it offers integrated water management for industry by combining chemical, equipment, engineering, and service for customized solutions to reduce water and energy usage. Additionally, the company is involved in the coal mining operations in North Dakota; and real estate investment activities in Florida. The company owns and operates 167 substations with a total capacity of 8,540 megavolt amperes. It serves taconite mining, iron concentrate, paper, pulp and wood products, pipeline, and other industries. The company was founded in 1906 and is headquartered in Duluth, Minnesota.

CMS Energy Company Profile

CMS Energy Corporation operates as an energy company primarily in Michigan. It operates through three segments: Electric Utility, Gas Utility, and Enterprises. The Electric Utility segment engages in the generation, purchase, transmission, distribution, and sale of electricity. It generates electricity through fossil-fuel-fired plants, as well as renewable energy and nuclear sources. This segment's transmission and distribution system includes 214 miles of transmission overhead lines; 188 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,431 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 56,098 miles of electric distribution overhead lines; 10,665 miles of underground distribution lines; and substations. The Gas Utility segment is involved in the purchase, transmission, storage, distribution, and sale of natural gas. This segment's gas transmission, storage, and distribution system comprises 1,672 miles of transmission lines; 15 gas storage fields; 28,194 miles of distribution mains; and 8 compressor stations. The Enterprises segment engages in the independent power production and marketing activities; and development of renewable generation. This segment owns interests in independent power plants totaling 1,203 megawatts. The company also operates an industrial bank providing unsecured consumer installment loans for financing home improvements. It serves 1.8 million electric customers and 1.8 million gas customers, including residential, commercial, and diversified industrial customers in Michigan's Lower Peninsula. CMS Energy Corporation was founded in 1987 and is headquartered in Jackson, Michigan.

Receive News & Ratings for ALLETE Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for ALLETE and related companies with MarketBeat.com's FREE daily email newsletter.

Leave a Reply