Allete (NYSE: ALE) and Dominion Energy (NYSE:D) are both mid-cap utilities companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, risk, dividends, institutional ownership, analyst recommendations, profitability and earnings.

Volatility and Risk

Allete has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500. Comparatively, Dominion Energy has a beta of 0.29, suggesting that its stock price is 71% less volatile than the S&P 500.

Earnings and Valuation

This table compares Allete and Dominion Energy’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Allete $1.41 billion 2.78 $412.30 million $3.39 22.69
Dominion Energy $12.42 billion 3.99 $6.23 billion $3.46 22.27

Dominion Energy has higher revenue and earnings than Allete. Dominion 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 Dominion Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allete 12.09% 9.21% 3.65%
Dominion Energy 17.48% 14.04% 3.29%

Analyst Ratings

This is a summary of current ratings and recommmendations for Allete and Dominion Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allete 0 2 2 0 2.50
Dominion Energy 0 8 2 0 2.20

Allete presently has a consensus target price of $77.50, suggesting a potential upside of 0.77%. Dominion Energy has a consensus target price of $79.57, suggesting a potential upside of 3.29%. Given Dominion Energy’s higher probable upside, analysts plainly believe Dominion Energy is more favorable than Allete.

Insider and Institutional Ownership

71.0% of Allete shares are held by institutional investors. Comparatively, 64.4% of Dominion Energy shares are held by institutional investors. 0.4% of Allete shares are held by insiders. Comparatively, 0.4% of Dominion Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Dividends

Allete pays an annual dividend of $2.14 per share and has a dividend yield of 2.8%. Dominion Energy pays an annual dividend of $3.02 per share and has a dividend yield of 3.9%. Allete pays out 63.1% of its earnings in the form of a dividend. Dominion Energy pays out 87.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Allete has increased its dividend for 6 consecutive years and Dominion Energy has increased its dividend for 8 consecutive years. Dominion Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Dominion Energy beats Allete on 9 of the 16 factors compared between the two stocks.

About Allete

ALLETE, Inc. is an energy company. The Company’s segments include Regulated Operations, ALLETE Clean Energy, Inc. (ALLETE Clean Energy), U.S. Water Services Holding Company (U.S. Water Services), and Corporate and Other. The Regulated Operations segment includes its regulated utilities, Minnesota Power, and Superior Water, Light and Power Company, and its investment in American Transmission Company LLC. The ALLETE Clean Energy segment focuses on developing, acquiring and operating clean and renewable energy projects. The U.S. Water Services provides integrated water management for industry by combining chemical, equipment, engineering and service for customized solution. As of December 31, 2016, its Corporate and Other consisted of BNI Energy, Inc. (BNI Energy), its coal mining operations in North Dakota, ALLETE Properties, LLC (ALLETE Properties), its Florida real estate investment and approximately 5,000 acres of land in Minnesota.

About Dominion Energy

Dominion Energy, Inc., formerly Dominion Resources, Inc., is a producer and transporter of energy. Dominion is focused on its investment in regulated electric generation, transmission and distribution and regulated natural gas transmission and distribution infrastructure. It operates through three segments: Dominion Virginia Power operating segment (DVP), Dominion Generation, Dominion Energy, and Corporate and Other. The DVP segment includes regulated electric distribution and regulated electric transmission. The Dominion Generation segment includes regulated electric fleet and merchant electric fleet. The Dominion Energy segment includes gas transmission and storage, gas gathering and processing, liquefied natural gas import and storage, and nonregulated retail energy marketing. As of December 31, 2016, Dominion served utility and retail energy customers, and operated an underground natural gas storage system with approximately one trillion cubic feet of storage capacity.

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