ITC (ITC) versus ALLETE (ALE) Financial Analysis

ITC (NYSE: ITC) and ALLETE (NYSE:ALE) are both mid-cap electric utilities – nec companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, analyst recommendations, earnings and risk.

Institutional and Insider Ownership

84.2% of ITC shares are owned by institutional investors. Comparatively, 73.2% of ALLETE shares are owned by institutional investors. 3.2% of ITC shares are owned by company insiders. Comparatively, 0.4% of ALLETE shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares ITC and ALLETE’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ITC N/A N/A N/A $1.48 30.74
ALLETE $1.34 billion 2.82 $155.30 million $3.46 21.42

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

Analyst Ratings

This is a summary of recent ratings and recommmendations for ITC and ALLETE, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ITC 0 0 0 0 N/A
ALLETE 1 2 0 0 1.67

ALLETE has a consensus target price of $77.67, suggesting a potential upside of 4.77%. Given ALLETE’s higher probable upside, analysts plainly believe ALLETE is more favorable than ITC.

Profitability

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

Net Margins Return on Equity Return on Assets
ITC 27.42% 16.62% 3.79%
ALLETE 12.31% 9.21% 3.71%

Dividends

ITC pays an annual dividend of $0.86 per share and has a dividend yield of 1.9%. ALLETE pays an annual dividend of $2.14 per share and has a dividend yield of 2.9%. ITC pays out 58.1% 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. ITC has increased its dividend for 5 consecutive years and ALLETE has increased its dividend for 6 consecutive years. ALLETE is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

ITC beats ALLETE on 6 of the 11 factors compared between the two stocks.

About ITC

ITC Holdings Corp. (ITC Holdings) is a holding company. The Company is engaged in owning, operating, maintaining and investing in transmission infrastructure. The Company’s business consists primarily of the electric transmission operations of its Regulated Operating Subsidiaries. Its Regulated Operating Subsidiaries include International Transmission Company (ITCTransmission), Michigan Electric Transmission Company, LLC (METC), ITC Midwest LLC (ITC Midwest). The operations performed by its Regulated Operating Subsidiaries fall into the various categories, such as asset planning; engineering, design and construction; maintenance, and real time operations. Its customers include investor-owned utilities, municipalities, cooperatives, power marketers and alternative energy suppliers. It owns and operates high-voltage systems in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma.

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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