Comparing Principal Financial Group (NASDAQ:PFG) and AON (NYSE:AON)

AON (NYSE:AON) and Principal Financial Group (NASDAQ:PFG) are both large-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, earnings, institutional ownership, profitability and dividends.

Analyst Ratings

This is a breakdown of recent ratings and target prices for AON and Principal Financial Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AON	2	6	12	0	2.50
Principal Financial Group	3	6	3	0	2.00

AON currently has a consensus target price of $367.59, suggesting a potential upside of 20.69%. Principal Financial Group has a consensus target price of $108.67, suggesting a potential upside of 0.68%. Given AON’s stronger consensus rating and higher probable upside, research analysts clearly believe AON is more favorable than Principal Financial Group.

Valuation & Earnings

This table compares AON and Principal Financial Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AON	$17.18 billion	3.76	$3.69 billion	$18.14	16.79
Principal Financial Group	$15.63 billion	1.48	$1.19 billion	$7.04	15.33

AON has higher revenue and earnings than Principal Financial Group. Principal Financial Group is trading at a lower price-to-earnings ratio than AON, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

86.1% of AON shares are held by institutional investors. Comparatively, 75.1% of Principal Financial Group shares are held by institutional investors. 1.0% of AON shares are held by company insiders. Comparatively, 1.1% of Principal Financial Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares AON and Principal Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AON	22.27%	42.13%	7.57%
Principal Financial Group	9.93%	16.49%	0.58%

Risk & Volatility

AON has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500. Comparatively, Principal Financial Group has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Dividends

AON pays an annual dividend of $3.28 per share and has a dividend yield of 1.1%. Principal Financial Group pays an annual dividend of $3.36 per share and has a dividend yield of 3.1%. AON pays out 18.1% of its earnings in the form of a dividend. Principal Financial Group pays out 47.7% 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. Principal Financial Group has raised its dividend for 2 consecutive years. Principal Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

AON beats Principal Financial Group on 13 of the 17 factors compared between the two stocks.

About AON

Aon Plc engages in the provision of risk, health, and wealth solutions. It focuses on risk capital including claim management, reinsurance, risk analysis, management, retention, and transfer; and human capital involving analytics, health and benefits, investments, pensions and retirement, talent and rewards, and workplace wellbeing. The company was founded in 1982 and is headquartered in Dublin, Ireland.

About Principal Financial Group

Principal Financial Group, Inc. provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide. The company operates through Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments. The Retirement and Income Solutions segment provides a portfolio of asset accumulation products and services for retirement savings and income. It offers products and services for defined contribution plans, including 401(k) and 403(b) plans, defined benefit pension plans, nonqualified executive benefit plans, employee stock ownership plans, equity compensation, and pension risk transfer services; individual retirement accounts; investment only products; and mutual funds, individual variable annuities, and bank products. The Principal Global Investors segment provides equity, fixed income, real estate, and other alternative investments, as well as asset allocation, stable value management, and other structured investment strategies. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities, and life insurance accumulation products, as well as voluntary savings plans in Brazil, Chile, Mexico, China, Hong Kong Special Administrative Region, India, and Southeast Asia. The U.S. Insurance Solutions segment provides specialty benefits, such as group dental and vision insurance, group life insurance, and group and individual disability insurance, as well as administers group dental, disability, and vision benefits; and individual life insurance products comprising universal, variable universal, indexed universal, and term life insurance products in the United States. It also offers insurance solutions for small and medium-sized businesses and their owners, as well as executives. Principal Financial Group, Inc. was founded in 1879 and is based in Des Moines, Iowa.