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

Risk and Volatility

NRG Yield has a beta of 2.52, meaning that its share price is 152% more volatile than the S&P 500. Comparatively, The AES has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500.

Profitability

This table compares NRG Yield and The AES’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NRG Yield 4.10% 1.76% 0.48%
The AES -5.43% 15.14% 2.47%

Institutional and Insider Ownership

29.6% of NRG Yield shares are owned by institutional investors. Comparatively, 93.8% of The AES shares are owned by institutional investors. 0.2% of NRG Yield shares are owned by company insiders. Comparatively, 1.1% of The AES shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings for NRG Yield and The AES, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NRG Yield 0 6 3 0 2.33
The AES 0 3 2 0 2.40

NRG Yield presently has a consensus target price of $19.57, suggesting a potential upside of 4.10%. The AES has a consensus target price of $13.00, suggesting a potential upside of 19.71%. Given The AES’s stronger consensus rating and higher possible upside, analysts plainly believe The AES is more favorable than NRG Yield.

Earnings and Valuation

This table compares NRG Yield and The AES’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NRG Yield $1.02 billion 3.40 $67.00 million $0.42 44.76
The AES $13.59 billion 0.53 -$1.13 billion ($1.17) -9.28

NRG Yield has higher earnings, but lower revenue than The AES. The AES is trading at a lower price-to-earnings ratio than NRG Yield, indicating that it is currently the more affordable of the two stocks.

Dividends

NRG Yield pays an annual dividend of $1.15 per share and has a dividend yield of 6.1%. The AES pays an annual dividend of $0.48 per share and has a dividend yield of 4.4%. NRG Yield pays out 273.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. The AES pays out -41.0% of its earnings in the form of a dividend. NRG Yield has increased its dividend for 4 consecutive years. NRG Yield is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

NRG Yield beats The AES on 9 of the 17 factors compared between the two stocks.

About NRG Yield

NRG Yield, Inc. serves as the primary vehicle, through which NRG Energy, Inc. owns, operates and acquires contracted renewable and conventional generation and thermal infrastructure assets. It owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the United States. Its contracted generation portfolio includes three natural gas or dual-fired facilities, eight utility-scale solar and wind generation facilities and two portfolios of distributed solar facilities that collectively represent 1,324 net megawatt. The Company also own thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,098 net megawatt and electric generation capacity of 123 net megawatt. In July 2014, NRG Yield Inc completed its acquisition of three Right of First Offer (ROFO) assets from NRG Energy, Inc. In August 2014, it acquired Alta Wind facility located in Tehachapi, California from Terra-Gen Power LLC.

About The AES

The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.

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