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

Institutional and Insider Ownership

91.9% of NRG Energy shares are held by institutional investors. Comparatively, 28.4% of NRG Yield shares are held by institutional investors. 0.3% of NRG Energy shares are held by insiders. Comparatively, 0.2% of NRG Yield 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.

Volatility and Risk

NRG Energy has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500. Comparatively, NRG Yield has a beta of 2.53, indicating that its stock price is 153% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for NRG Energy and NRG Yield, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NRG Energy 0 1 7 0 2.88
NRG Yield 0 6 4 0 2.40

NRG Energy currently has a consensus price target of $25.00, indicating a potential upside of 0.00%. NRG Yield has a consensus price target of $19.57, indicating a potential upside of 5.22%. Given NRG Yield’s higher probable upside, analysts clearly believe NRG Yield is more favorable than NRG Energy.

Valuation & Earnings

This table compares NRG Energy and NRG Yield’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
NRG Energy $12.53 billion 0.63 $2.50 billion ($4.36) -5.73
NRG Yield $1.01 billion 1.81 $753.00 million $0.45 41.33

NRG Energy has higher revenue and earnings than NRG Yield. NRG Energy 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 Energy pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. NRG Yield pays an annual dividend of $1.12 per share and has a dividend yield of 6.0%. NRG Energy pays out -2.8% of its earnings in the form of a dividend. NRG Yield pays out 248.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

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

Net Margins Return on Equity Return on Assets
NRG Energy -10.67% 12.38% 1.85%
NRG Yield 4.47% 1.89% 0.53%

Summary

NRG Energy beats NRG Yield on 9 of the 16 factors compared between the two stocks.

NRG Energy Company Profile

NRG Energy, Inc. (NRG) is an integrated power company. The Company is engaged in producing, selling and delivering electricity and related products and services in various markets in the United States. The Company’s segments include Generation, Retail, Renewables, NRG Yield, Inc. (NRG Yield) and Corporate activities. The Generation segment includes generation, international and Boston Energy Trading and Marketing LLC (BETM). The Retail segment includes Mass customers and Business Solutions. Its Business Solutions include commercial, industrial and governmental/institutional (C&I) customers, and other distributed and reliability products. The Renewables segment includes solar and wind assets. The NRG Yield segment includes certain of the Company’s contracted generation assets. The corporate activities segment includes residential solar and electric vehicle services. The Company owned and operated approximately 47,000 megawatts (MW) of generation, as of December 31, 2016.

NRG Yield Company Profile

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.

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