Comparing Black Hills Corporation (NYSE:BKH) and CenterPoint Energy (CNP)

CenterPoint Energy (NYSE: CNP) and Black Hills Corporation (NYSE:BKH) are both mid-cap utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, institutional ownership, risk, valuation, profitability and analyst recommendations.

Volatility and Risk

CenterPoint Energy has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500. Comparatively, Black Hills Corporation has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500.

Insider and Institutional Ownership

76.9% of CenterPoint Energy shares are owned by institutional investors. Comparatively, 93.8% of Black Hills Corporation shares are owned by institutional investors. 0.2% of CenterPoint Energy shares are owned by insiders. Comparatively, 1.1% of Black Hills Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for CenterPoint Energy and Black Hills Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CenterPoint Energy 0 6 1 0 2.14
Black Hills Corporation 0 0 5 0 3.00

CenterPoint Energy presently has a consensus price target of $27.71, indicating a potential downside of 7.56%. Black Hills Corporation has a consensus price target of $73.40, indicating a potential upside of 6.45%. Given Black Hills Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe Black Hills Corporation is more favorable than CenterPoint Energy.

Valuation and Earnings

This table compares CenterPoint Energy and Black Hills Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CenterPoint Energy $8.85 billion 1.46 $2.08 billion $1.39 21.57
Black Hills Corporation $1.70 billion 2.17 $588.78 million $2.38 28.97

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

Dividends

CenterPoint Energy pays an annual dividend of $1.07 per share and has a dividend yield of 3.6%. Black Hills Corporation pays an annual dividend of $1.78 per share and has a dividend yield of 2.6%. CenterPoint Energy pays out 77.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Black Hills Corporation pays out 74.8% of its earnings in the form of a dividend. CenterPoint Energy has raised its dividend for 47 consecutive years and Black Hills Corporation has raised its dividend for 11 consecutive years. CenterPoint Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares CenterPoint Energy and Black Hills Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CenterPoint Energy 6.86% 16.45% 2.65%
Black Hills Corporation 7.71% 10.48% 2.84%

Summary

Black Hills Corporation beats CenterPoint Energy on 11 of the 17 factors compared between the two stocks.

CenterPoint Energy Company Profile

CenterPoint Energy, Inc. is a public utility holding company. The Company, through its subsidiaries, owns and operates electric transmission and distribution facilities, and natural gas distribution facilities. The Electric Transmission & Distribution segment provides electric transmission and distribution services to retail electric providers. Its Natural Gas Distribution segment offers intrastate natural gas sales to and natural gas transportation and distribution for residential, commercial and industrial customers. Its Energy Services segment includes non-rate regulated gas sales and transportation and storage services for commercial and industrial customers. Its Midstream Investments segment includes equity investment in Enable that owns, operates and develops natural gas and crude oil assets. Its Other Operations segment includes office buildings and other real estate used in its business operations and other corporate operations.

Black Hills Corporation Company Profile

Black Hills Corporation is a holding company. The Company is an integrated energy company, which is focused primarily on regulated utilities. The Company operates through segments, including Electric Utilities, Gas Utilities, Power Generation, Mining, Oil and Gas, and Corporate. As of December 31, 2016, the Electric Utilities segment generated, transmitted and distributed electricity to approximately 208,500 customers in South Dakota, Wyoming, Colorado and Montana. The Gas Utilities Segment includes the natural gas operations of Cheyenne Light. The Power Generation segment produces electric power from its generating plants and sells the electric capacity and energy principally to its utilities under long-term contracts. The Mining segment operates through its Wyodak Resources Development Corp. (WRDC) subsidiary. The Company’s Oil and Gas segment acquires, explores for, develops and produces natural gas and crude oil in the United States primarily in the Rocky Mountain region.

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