Analyzing Midcoast Energy Partners (MEP) & Targa Resources Partners (NGLS)

Targa Resources Partners (NYSE: NGLS) and Midcoast Energy Partners (NYSE:MEP) are both energy companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, dividends, risk, institutional ownership, profitability, analyst recommendations and valuation.

Dividends

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Targa Resources Partners pays an annual dividend of $3.30 per share and has a dividend yield of 31.0%. Midcoast Energy Partners pays an annual dividend of $1.43 per share and has a dividend yield of 18.0%. Targa Resources Partners pays out 423.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Midcoast Energy Partners pays out -39.0% of its earnings in the form of a dividend. Targa Resources Partners has raised its dividend for 8 consecutive years and Midcoast Energy Partners has raised its dividend for 3 consecutive years. Targa Resources Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Targa Resources Partners and Midcoast Energy Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources Partners 0 0 0 0 N/A
Midcoast Energy Partners 0 0 0 0 N/A

Insider and Institutional Ownership

64.7% of Midcoast Energy Partners shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Targa Resources Partners and Midcoast Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources Partners 3.27% 0.29% 1.61%
Midcoast Energy Partners -5.25% -34.51% -2.64%

Valuation & Earnings

This table compares Targa Resources Partners and Midcoast Energy Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Targa Resources Partners N/A N/A N/A $0.78 13.65
Midcoast Energy Partners N/A N/A N/A ($3.67) -2.17

Midcoast Energy Partners is trading at a lower price-to-earnings ratio than Targa Resources Partners, indicating that it is currently the more affordable of the two stocks.

Summary

Targa Resources Partners beats Midcoast Energy Partners on 7 of the 9 factors compared between the two stocks.

Targa Resources Partners Company Profile

Targa Resources Partners LP is a provider of midstream natural gas and natural gas liquid (NGL) services in the United States with a presence in crude oil gathering and petroleum terminaling. The Company is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas (LPG) exporters; gathering, storing and terminaling crude oil, and storing, terminaling and selling refined petroleum products. The Company operates in two divisions: Gathering and Processing, and Logistics and Marketing. The Gathering and Processing division consists of two segments: Field Gathering and Processing, and Coastal Gathering and Processing. The Logistics and Marketing division consists of two segments: Logistics Assets and Marketing and Distribution.

Midcoast Energy Partners Company Profile

Midcoast Energy Partners, L.P. (MEP) is a limited partnership company that is engaged in the natural gas and natural gas liquids (NGL) midstream business. It operates through two segments: Gathering, Processing and Transportation, and Logistics and Marketing. It also provides marketing services of natural gas and NGLs to wholesale customers. The Company’s gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business. The Company holds interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities.

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