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

Insider and Institutional Ownership

65.6% of Aflac shares are held by institutional investors. Comparatively, 68.3% of Principal Financial Group shares are held by institutional investors. 3.0% of Aflac shares are held by company insiders. Comparatively, 1.5% of Principal Financial Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Aflac 11.98% 13.09% 2.05%
Principal Financial Group 10.15% 13.57% 0.63%

Valuation & Earnings

This table compares Aflac and Principal Financial Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aflac $22.65 billion 1.46 $4.75 billion $6.63 12.65
Principal Financial Group $12.56 billion 1.55 $1.88 billion $4.40 15.30

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

Dividends

Aflac pays an annual dividend of $1.72 per share and has a dividend yield of 2.1%. Principal Financial Group pays an annual dividend of $1.88 per share and has a dividend yield of 2.8%. Aflac pays out 25.9% of its earnings in the form of a dividend. Principal Financial Group pays out 42.7% 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. Aflac has raised its dividend for 5 consecutive years and Principal Financial Group has raised its dividend for 34 consecutive years. Principal Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Aflac has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500. Comparatively, Principal Financial Group has a beta of 1.67, suggesting that its share price is 67% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Aflac and Principal Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aflac 3 5 2 0 1.90
Principal Financial Group 1 5 2 0 2.13

Aflac presently has a consensus target price of $77.33, indicating a potential downside of 7.80%. Principal Financial Group has a consensus target price of $65.00, indicating a potential downside of 3.42%. Given Principal Financial Group’s stronger consensus rating and higher probable upside, analysts plainly believe Principal Financial Group is more favorable than Aflac.

Summary

Principal Financial Group beats Aflac on 9 of the 16 factors compared between the two stocks.

Aflac Company Profile

Aflac Incorporated is a business holding company. The Company is involved in supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). The Company’s insurance business consists of two segments: Aflac Japan and Aflac U.S. The Company designs the United States insurance products to provide supplemental coverage for people having medical or primary insurance coverage. Aflac U.S. offers accident coverage on both an individual and group basis. The Company offers cancer plans, critical illness plans, and critical care and recovery plans. The Company designs the United States insurance products to provide supplemental coverage for people having medical or primary insurance coverage. Aflac U.S. offers accident coverage on both an individual and group basis. The Company offers cancer plans, critical illness plans, and critical care and recovery plans.

Principal Financial Group Company Profile

Principal Financial Group, Inc. is an investment management company. The Company offers a range of financial products and services, including retirement, asset management and insurance. Its segments include Retirement and Income Solutions; Principal Global Investors, Principal International; U.S. Insurance Solutions, and Corporate. The Company offers a portfolio of products and services for retirement savings and retirement income. The Company’s Principal Global Investors segment manages assets for investors around the world. The Company offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The Company’s U.S. Insurance Solutions segment provides group and individual insurance solutions. It focuses on small and medium-sized businesses, providing a range of retirement and employee benefit solutions, and individual insurance solutions to meet the needs of the business owners and their employees.

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