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

Profitability

This table compares DTE Energy and Allete’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DTE Energy 8.01% 9.56% 2.84%
Allete 12.31% 9.21% 3.71%

Risk and Volatility

DTE Energy has a beta of 0.23, indicating that its stock price is 77% less volatile than the S&P 500. Comparatively, Allete has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500.

Institutional and Insider Ownership

68.2% of DTE Energy shares are owned by institutional investors. Comparatively, 70.2% of Allete shares are owned by institutional investors. 0.5% of DTE Energy shares are owned by insiders. Comparatively, 0.4% of Allete shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

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

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
DTE Energy $10.63 billion 1.91 $868.00 million $5.46 20.68
Allete $1.34 billion 2.95 $155.30 million $3.46 22.40

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for DTE Energy and Allete, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DTE Energy 1 3 3 0 2.29
Allete 1 2 0 0 1.67

DTE Energy presently has a consensus target price of $112.43, indicating a potential downside of 0.44%. Allete has a consensus target price of $77.67, indicating a potential upside of 0.22%. Given Allete’s higher possible upside, analysts clearly believe Allete is more favorable than DTE Energy.

Dividends

DTE Energy pays an annual dividend of $3.30 per share and has a dividend yield of 2.9%. Allete pays an annual dividend of $2.14 per share and has a dividend yield of 2.8%. DTE Energy pays out 60.4% of its earnings in the form of a dividend. Allete pays out 61.8% 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. DTE Energy has increased its dividend for 6 consecutive years and Allete has increased its dividend for 5 consecutive years. DTE Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

DTE Energy beats Allete on 11 of the 17 factors compared between the two stocks.

About DTE Energy

DTE Energy Company is an energy company. Its segments include Electric, which consists of DTE Electric Company, which is engaged in the generation, purchase, distribution and sale of electricity to residential, commercial and industrial customers in southeastern Michigan; Gas, which consists of DTE Gas Company, which is engaged in the purchase, storage, transportation, distribution and sale of natural gas to residential, commercial and industrial customers throughout Michigan; Gas Storage and Pipelines, which consists of natural gas pipeline, gathering and storage businesses; Power and Industrial Projects, which consists of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers, and sell electricity from renewable energy projects; Energy Trading, which consists of energy marketing and trading operations, and Corporate and Other, which includes various holding company activities and holds certain non-utility debt.

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.

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