Contrasting Ameren (NYSE:AEE) & MGE Energy (NASDAQ:MGEE)

Ameren (NYSE:AEE) and MGE Energy (NASDAQ:MGEE) are both utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, dividends, risk, institutional ownership and earnings.

Volatility & Risk

Ameren has a beta of 0.47, meaning that its stock price is 53% less volatile than the S&P 500. Comparatively, MGE Energy has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Dividends

Ameren pays an annual dividend of $3.00 per share and has a dividend yield of 2.7%. MGE Energy pays an annual dividend of $1.90 per share and has a dividend yield of 2.4%. Ameren pays out 54.0% of its earnings in the form of a dividend. MGE Energy pays out 48.7% 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. Ameren has increased its dividend for 12 consecutive years and MGE Energy has increased its dividend for 49 consecutive years.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Ameren and MGE Energy, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ameren	0	3	10	0	2.77
MGE Energy	1	1	1	0	2.00

Ameren currently has a consensus target price of $121.50, indicating a potential upside of 10.48%. MGE Energy has a consensus target price of $78.50, indicating a potential downside of 2.17%. Given Ameren’s stronger consensus rating and higher possible upside, research analysts plainly believe Ameren is more favorable than MGE Energy.

Earnings and Valuation

This table compares Ameren and MGE Energy”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ameren	$8.80 billion	3.46	$1.46 billion	$5.56	19.78
MGE Energy	$743.65 million	3.97	$135.89 million	$3.90	20.58

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

Profitability

This table compares Ameren and MGE Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ameren	17.17%	10.94%	2.99%
MGE Energy	18.61%	10.94%	4.68%

Insider & Institutional Ownership

79.1% of Ameren shares are owned by institutional investors. Comparatively, 52.6% of MGE Energy shares are owned by institutional investors. 0.3% of Ameren shares are owned by company insiders. Comparatively, 0.4% of MGE Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

About Ameren

Ameren Corporation, together with its subsidiaries, operates as a public utility holding company in the United States. The company operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. It engages in the rate-regulated electric generation, transmission, and distribution activities; and rate-regulated natural gas distribution business. In addition, the company generates electricity through coal, nuclear, and natural gas, as well as renewable sources, such as hydroelectric, wind, methane gas, and solar. It serves residential, commercial, and industrial customers. The company was founded in 1881 and is headquartered in Saint Louis, Missouri.

About MGE Energy

MGE Energy, Inc., through its subsidiaries, operates as a public utility holding company primarily in the United States. It operates through Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other segments. The company generates, purchases, and distributes electricity and natural gas in Wisconsin and Iowa; owns and leases electric generating capacity; and plans, constructs, operates, maintains, and expands transmission facilities to provide transmission power services. It generates electricity from coal-fired, gas-fired, and renewable energy sources. As of December 31, 2023, the company owned and operated 835 miles of overhead electric distribution lines; 1,330 miles of underground electric distribution cables; 49 substations with an installed capacity of 1.2 million kVA; and gas facilities, including 3,066 miles of distribution mains, as well as supplied electric service to approximately 163,000 customers. MGE Energy, Inc. founded in 2001 and is headquartered in Madison, Wisconsin.