Sempra Energy (NYSE: SRE) and CMS Energy Corporation (NYSE:CMS) are both large-cap 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Sempra Energy 15.51% 9.11% 2.84%
CMS Energy Corporation 8.52% 12.98% 2.64%

Earnings & Valuation

This table compares Sempra Energy and CMS Energy Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sempra Energy $10.97 billion 2.65 $3.71 billion $6.75 17.18
CMS Energy Corporation $6.51 billion 2.06 $2.06 billion $1.99 23.98

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

Insider and Institutional Ownership

80.8% of Sempra Energy shares are held by institutional investors. Comparatively, 87.4% of CMS Energy Corporation shares are held by institutional investors. 0.2% of Sempra Energy shares are held by insiders. Comparatively, 0.7% of CMS Energy Corporation 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 Sempra Energy and CMS Energy Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sempra Energy 0 3 5 0 2.63
CMS Energy Corporation 0 5 5 0 2.50

Sempra Energy currently has a consensus target price of $123.75, suggesting a potential upside of 6.72%. CMS Energy Corporation has a consensus target price of $48.56, suggesting a potential upside of 1.75%. Given Sempra Energy’s stronger consensus rating and higher possible upside, equities analysts plainly believe Sempra Energy is more favorable than CMS Energy Corporation.

Risk and Volatility

Sempra Energy has a beta of 0.55, meaning that its stock price is 45% less volatile than the S&P 500. Comparatively, CMS Energy Corporation has a beta of 0.15, meaning that its stock price is 85% less volatile than the S&P 500.

Dividends

Sempra Energy pays an annual dividend of $3.29 per share and has a dividend yield of 2.8%. CMS Energy Corporation pays an annual dividend of $1.33 per share and has a dividend yield of 2.8%. Sempra Energy pays out 48.7% of its earnings in the form of a dividend. CMS Energy Corporation pays out 66.8% 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. Sempra Energy has increased its dividend for 5 consecutive years and CMS Energy Corporation has increased its dividend for 6 consecutive years. Sempra Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Sempra Energy beats CMS Energy Corporation on 11 of the 16 factors compared between the two stocks.

About Sempra Energy

Sempra Energy is a holding company. The Company’s principal operating units are Sempra Utilities, which includes its San Diego Gas & Electric Company (SDG&E), Southern California Gas Company (SoCalGas) and Sempra South American Utilities segments, and Sempra Infrastructure, which includes its Sempra Mexico, Sempra Renewables and Sempra LNG & Midstream segments. As of December 31, 2016, SDG&E’s service area covered 4,100 square miles. Sempra South American Utilities operates Chilquinta Energia, which serves customers in the region of Valparaiso in central Chile. As of December 31, 2016, SoCalGas had natural gas franchises with the 12 counties and the 223 cities in its service territory. Sempra LNG & Midstream owns land in Simpson County, Mississippi Hub. Sempra LNG & Midstream owns land in Port Arthur, Texas. Sempra Renewables has operations, investments or development projects in the various United States markets.

About CMS Energy Corporation

CMS Energy Corporation is an energy company operating primarily in Michigan. The Company operates through three segments: electric utility, which consists of regulated activities associated with the generation, transmission and distribution of electricity in Michigan; gas utility, which consists of regulated activities associated with the transportation, storage and distribution of natural gas in Michigan, and enterprises, which consists of various subsidiaries engaging primarily in domestic independent power production. The Company is the parent holding company of various subsidiaries, including Consumers Energy Company (Consumers), an electric and gas utility company, and CMS Enterprises Company (CMS Enterprises), a domestic independent power producer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a group of other industries.

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