Contrasting ARC Resources (OTCMKTS:AETUF) and Northern Oil and Gas (NYSE:NOG)

ARC Resources (OTCMKTS:AETUF) and Northern Oil and Gas (NYSE:NOG) are both oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, earnings, risk and analyst recommendations.

Dividends

ARC Resources pays an annual dividend of $0.50 per share and has a dividend yield of 2.7%. Northern Oil and Gas pays an annual dividend of $1.60 per share and has a dividend yield of 3.9%. ARC Resources pays out 33.8% of its earnings in the form of a dividend. Northern Oil and Gas pays out 25.9% 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. Northern Oil and Gas has increased its dividend for 2 consecutive years. Northern Oil and Gas is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares ARC Resources and Northern Oil and Gas’ revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARC Resources	$4.19 billion	2.68	$1.18 billion	$1.48	12.70
Northern Oil and Gas	$2.01 billion	2.06	$922.97 million	$6.17	6.64

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

Analyst Ratings

This is a summary of recent recommendations for ARC Resources and Northern Oil and Gas, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARC Resources	0	0	2	1	3.33
Northern Oil and Gas	1	2	7	1	2.73

ARC Resources presently has a consensus price target of $21.92, indicating a potential upside of 16.58%. Northern Oil and Gas has a consensus price target of $48.00, indicating a potential upside of 17.22%. Given Northern Oil and Gas’ higher possible upside, analysts plainly believe Northern Oil and Gas is more favorable than ARC Resources.

Profitability

This table compares ARC Resources and Northern Oil and Gas’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARC Resources	22.70%	16.61%	10.05%
Northern Oil and Gas	30.01%	34.06%	13.70%

Institutional & Insider Ownership

2.5% of ARC Resources shares are held by institutional investors. Comparatively, 98.8% of Northern Oil and Gas shares are held by institutional investors. 0.3% of ARC Resources shares are held by insiders. Comparatively, 2.8% of Northern Oil and Gas shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Volatility and Risk

ARC Resources has a beta of 1.16, meaning that its share price is 16% more volatile than the S&P 500. Comparatively, Northern Oil and Gas has a beta of 1.84, meaning that its share price is 84% more volatile than the S&P 500.

Summary

Northern Oil and Gas beats ARC Resources on 12 of the 17 factors compared between the two stocks.

About ARC Resources

ARC Resources Ltd. engages in the acquiring and developing crude oil, natural gas, condensate, and natural gas liquids in Canada. It primarily holds interests in the Montney basin located in Alberta and northeast British Columbia. ARC Resources Ltd. was founded in 1996 and is based in Calgary, Canada.

About Northern Oil and Gas

Northern Oil and Gas, Inc., an independent energy company, engages in the acquisition, exploration, exploitation, development, and production of crude oil and natural gas properties in the United States. It primarily holds interests in the Williston Basin, the Appalachian Basin, and the Permian Basin in the United States. The company is based in Minnetonka, Minnesota.