Contrasting TransAlta (NYSE:TAC) and Clearway Energy (NYSE:CWEN)

Clearway Energy (NYSE:CWEN) and TransAlta (NYSE:TAC) are both mid-cap utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, risk, earnings, dividends and valuation.

Dividends

Clearway Energy pays an annual dividend of $1.90 per share and has a dividend yield of 5.5%. TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.5%. Clearway Energy pays out -231.7% of its earnings in the form of a dividend. TransAlta pays out 181.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Clearway Energy has raised its dividend for 2 consecutive years and TransAlta has raised its dividend for 2 consecutive years. Clearway Energy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Clearway Energy and TransAlta’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Clearway Energy	-5.64%	-1.66%	-0.56%
TransAlta	2.24%	14.75%	1.24%

Earnings and Valuation

This table compares Clearway Energy and TransAlta”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Clearway Energy	$1.67 billion	4.26	$169.00 million	($0.82)	-42.15
TransAlta	$1.72 billion	2.48	-$98.77 million	$0.11	122.47

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

Institutional & Insider Ownership

84.5% of Clearway Energy shares are owned by institutional investors. Comparatively, 59.0% of TransAlta shares are owned by institutional investors. 0.5% of Clearway Energy shares are owned by insiders. Comparatively, 13.1% of TransAlta shares are owned by 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 & Risk

Clearway Energy has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, TransAlta has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Clearway Energy and TransAlta, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Clearway Energy	1	0	7	2	3.00
TransAlta	0	1	6	2	3.11

Clearway Energy presently has a consensus target price of $42.00, indicating a potential upside of 21.51%. TransAlta has a consensus target price of $24.50, indicating a potential upside of 81.86%. Given TransAlta’s stronger consensus rating and higher possible upside, analysts clearly believe TransAlta is more favorable than Clearway Energy.

Summary

TransAlta beats Clearway Energy on 9 of the 16 factors compared between the two stocks.

About Clearway Energy

Clearway Energy, Inc. owns and operates electricity-generation facilities in the United States. Its portfolio includes renewable energy assets, primarily wind and solar, as well as energy storage and conventional power-generation and thermal infrastructure. The company sells electricity and related services to utilities and other customers, often through long-term contractual arrangements. Its facilities are located across multiple U.S. regions. Clearway Energy was formerly known as NRG Yield, Inc. and adopted its current name in 2018.

About TransAlta

TransAlta Corporation is a Canadian electric power generator that develops, owns and operates facilities producing electricity for wholesale markets. Its generation portfolio includes hydroelectric, wind, solar and thermal power, including natural gas-fired facilities. Founded in 1911 as Calgary Power, the company has a long history of supplying electricity in Western Canada. TransAlta’s operations and power-generation assets span Canada, the United States and Australia. The company also provides energy marketing and related services, managing and selling electricity and other energy products from its generation portfolio.