Contrasting AON (NYSE:AON) & Principal Financial Group (NASDAQ:PFG)

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

Risk & Volatility

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

Dividends

Principal Financial Group pays an annual dividend of $3.36 per share and has a dividend yield of 3.1%. AON pays an annual dividend of $3.28 per share and has a dividend yield of 1.1%. Principal Financial Group pays out 47.7% of its earnings in the form of a dividend. AON pays out 18.1% 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.

Profitability

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

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

Institutional and Insider Ownership

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

Analyst Recommendations

This is a breakdown of current recommendations for Principal Financial Group and AON, as provided by MarketBeat.

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

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

Valuation and Earnings

This table compares Principal Financial Group and AON”s top-line revenue, earnings per share and valuation.

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

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.

Summary

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

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.

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.