Contrasting Consolidated Edison (NYSE:ED) & AES (NYSE:AES)

Consolidated Edison (NYSE:ED) and AES (NYSE:AES) are both large-cap utilities companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, valuation, risk, analyst recommendations and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Consolidated Edison and AES, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Consolidated Edison	5	7	3	0	1.87
AES	0	5	6	0	2.55

Consolidated Edison presently has a consensus target price of $104.20, indicating a potential downside of 8.27%. AES has a consensus target price of $24.08, indicating a potential upside of 47.98%. Given AES’s stronger consensus rating and higher possible upside, analysts clearly believe AES is more favorable than Consolidated Edison.

Dividends

Consolidated Edison pays an annual dividend of $3.40 per share and has a dividend yield of 3.0%. AES pays an annual dividend of $0.70 per share and has a dividend yield of 4.3%. Consolidated Edison pays out 59.4% of its earnings in the form of a dividend. AES pays out 43.8% 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. Consolidated Edison has raised its dividend for 52 consecutive years and AES has raised its dividend for 12 consecutive years. AES is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Consolidated Edison and AES’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Consolidated Edison	12.27%	8.79%	2.89%
AES	9.47%	18.83%	3.04%

Earnings and Valuation

This table compares Consolidated Edison and AES”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Consolidated Edison	$15.26 billion	2.69	$1.82 billion	$5.72	19.86
AES	$12.28 billion	0.94	$1.68 billion	$1.60	10.17

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

Insider and Institutional Ownership

66.3% of Consolidated Edison shares are owned by institutional investors. Comparatively, 93.1% of AES shares are owned by institutional investors. 0.2% of Consolidated Edison shares are owned by company insiders. Comparatively, 0.6% of AES shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility and Risk

Consolidated Edison has a beta of 0.38, meaning that its share price is 62% less volatile than the S&P 500. Comparatively, AES has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Summary

AES beats Consolidated Edison on 10 of the 17 factors compared between the two stocks.

About Consolidated Edison

Consolidated Edison, Inc., through its subsidiaries, engages in the regulated electric, gas, and steam delivery businesses in the United States. It offers electric services to approximately 3.7 million customers in New York City and Westchester County; gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens, and Westchester County; and steam to approximately 1,530 customers in parts of Manhattan. The company also supplies electricity to approximately 0.3 million customers in southeastern New York and northern New Jersey; and gas to approximately 0.2 million customers in southeastern New York. In addition, it operates 545 circuit miles of transmission lines; 15 transmission substations; 63 distribution substations; 90,051 in-service line transformers; 3,788 pole miles of overhead distribution lines; and 2,314 miles of underground distribution lines, as well as 4,363 miles of mains and 380,870 service lines for natural gas distribution. Further, the company invests in electric and gas transmission projects. It primarily sells electricity to industrial, commercial, residential, and government customers. Consolidated Edison, Inc. was founded in 1823 and is based in New York, New York.

About AES

The AES Corporation, together with its subsidiaries, operates as a diversified power generation and utility company in the United States and internationally. The company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market. It uses various fuels and technologies to generate electricity, such as coal, gas, hydro, wind, solar, and biomass, as well as renewables comprising energy storage and landfill gas. The company owns and/or operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers. The company was formerly known as Applied Energy Services, Inc. and changed its name to The AES Corporation in April 2000. The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.