Contrasting South Bow (NYSE:SOBO) and TXO Partners (NYSE:TXO)

South Bow (NYSE:SOBO) and TXO Partners (NYSE:TXO) are both energy companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Volatility & Risk

South Bow has a beta of 0.22, suggesting that its stock price is 78% less volatile than the S&P 500. Comparatively, TXO Partners has a beta of 0.08, suggesting that its stock price is 92% less volatile than the S&P 500.

Institutional and Insider Ownership

27.4% of TXO Partners shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent recommendations and price targets for South Bow and TXO Partners, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
South Bow	3	8	4	0	2.07
TXO Partners	1	0	2	2	3.00

South Bow presently has a consensus price target of $33.00, indicating a potential downside of 2.45%. TXO Partners has a consensus price target of $19.00, indicating a potential upside of 32.41%. Given TXO Partners’ stronger consensus rating and higher possible upside, analysts clearly believe TXO Partners is more favorable than South Bow.

Dividends

South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 5.9%. TXO Partners pays an annual dividend of $1.60 per share and has a dividend yield of 11.2%. South Bow pays out 90.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TXO Partners pays out -207.8% of its earnings in the form of a dividend. TXO Partners has raised its dividend for 1 consecutive years. TXO Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares South Bow and TXO Partners”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
South Bow	$2.00 billion	3.53	$433.00 million	$2.21	15.31
TXO Partners	$405.96 million	1.96	-$21.62 million	($0.77)	-18.64

South Bow has higher revenue and earnings than TXO Partners. TXO Partners is trading at a lower price-to-earnings ratio than South Bow, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares South Bow and TXO Partners’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
South Bow	22.99%	15.84%	3.73%
TXO Partners	-9.23%	-5.59%	-2.83%

Summary

South Bow beats TXO Partners on 10 of the 17 factors compared between the two stocks.

About South Bow

South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.

About TXO Partners

TXO Partners, L.P., an oil and natural gas company, focuses on the acquisition, development, optimization, and exploitation of conventional oil, natural gas, and natural gas liquid reserves in North America. Its acreage positions are concentrated in the Permian Basin of West Texas and New Mexico and the San Juan Basin of New Mexico and Colorado. The company was formerly known as TXO Energy Partners, L.P. and changed its name to TXO Partners, L.P. in May 2023. TXO Partners, L.P. was incorporated in 2012 and is based in Fort Worth, Texas.