Head-To-Head Survey: RGC Resources (NASDAQ:RGCO) & Northwest Natural Gas (NYSE:NWN)

Northwest Natural Gas (NYSE:NWN) and RGC Resources (NASDAQ:RGCO) are both small-cap utilities companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, earnings, analyst recommendations, risk, profitability, valuation and institutional ownership.

Institutional and Insider Ownership

75.1% of Northwest Natural Gas shares are held by institutional investors. Comparatively, 35.8% of RGC Resources shares are held by institutional investors. 0.6% of Northwest Natural Gas shares are held by company insiders. Comparatively, 7.2% of RGC Resources shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Northwest Natural Gas and RGC Resources’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northwest Natural Gas	9.75%	8.33%	2.03%
RGC Resources	13.05%	11.73%	4.15%

Dividends

Northwest Natural Gas pays an annual dividend of $1.97 per share and has a dividend yield of 4.2%. RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 4.0%. Northwest Natural Gas pays out 65.7% of its earnings in the form of a dividend. RGC Resources pays out 64.9% 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. Northwest Natural Gas has increased its dividend for 70 consecutive years and RGC Resources has increased its dividend for 22 consecutive years. Northwest Natural Gas is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Northwest Natural Gas and RGC Resources”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northwest Natural Gas	$1.29 billion	1.54	$113.32 million	$3.00	15.74
RGC Resources	$95.33 million	2.37	$13.28 million	$1.34	16.15

Northwest Natural Gas has higher revenue and earnings than RGC Resources. Northwest Natural Gas is trading at a lower price-to-earnings ratio than RGC Resources, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Northwest Natural Gas and RGC Resources, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northwest Natural Gas	0	2	4	1	2.86
RGC Resources	0	0	2	0	3.00

Northwest Natural Gas presently has a consensus target price of $55.80, suggesting a potential upside of 18.14%. RGC Resources has a consensus target price of $27.00, suggesting a potential upside of 24.77%. Given RGC Resources’ stronger consensus rating and higher possible upside, analysts clearly believe RGC Resources is more favorable than Northwest Natural Gas.

Risk & Volatility

Northwest Natural Gas has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500. Comparatively, RGC Resources has a beta of 0.5, meaning that its share price is 50% less volatile than the S&P 500.

Summary

RGC Resources beats Northwest Natural Gas on 10 of the 18 factors compared between the two stocks.

About Northwest Natural Gas

Northwest Natural Holding Company, through its subsidiary, Northwest Natural Gas Company, provides regulated natural gas distribution services to residential, commercial, and industrial customers in the United States. The company operates a mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; offers natural gas asset management services; and operates an appliance retail center. It also engages in gas storage, water and wastewater, non-regulated renewable natural gas, and other investment businesses. In addition, the company provides natural gas service in Oregon and southwest Washington; and water and wastewater connections. Northwest Natural Holding Company was founded in 1859 and is headquartered in Portland, Oregon.

About RGC Resources

RGC Resources, Inc., through its subsidiaries, operates as an energy services company. It sells and distributes natural gas to residential, commercial, and industrial customers in Roanoke, Virginia, and the surrounding localities. The company also provides various unregulated services. It operates approximately 1,179 miles of transmission and distribution pipeline; and a liquefied natural gas storage facility, as well as owns and operates six metering stations. In addition, it produces biogas. RGC Resources, Inc. was founded in 1883 and is based in Roanoke, Virginia.