Humana (NYSE: HUM) and UnitedHealth Group (NYSE:UNH) are both large-cap medical companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, risk, earnings, analyst recommendations and profitabiliy.

Dividends

Humana pays an annual dividend of $1.60 per share and has a dividend yield of 0.7%. UnitedHealth Group pays an annual dividend of $3.00 per share and has a dividend yield of 1.6%. Humana pays out 16.2% of its earnings in the form of a dividend. UnitedHealth Group pays out 35.1% 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. Humana has increased its dividend for 6 consecutive years and UnitedHealth Group has increased its dividend for 7 consecutive years. UnitedHealth Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Humana and UnitedHealth Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Humana $54.34 billion 0.63 $2.27 billion $9.85 23.91
UnitedHealth Group $192.60 billion 0.98 $15.57 billion $8.54 22.35

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

Institutional & Insider Ownership

99.1% of Humana shares are held by institutional investors. Comparatively, 86.3% of UnitedHealth Group shares are held by institutional investors. 0.8% of Humana shares are held by company insiders. Comparatively, 0.9% of UnitedHealth Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Humana and UnitedHealth Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Humana 2.71% 14.38% 5.44%
UnitedHealth Group 4.32% 21.52% 6.81%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Humana and UnitedHealth Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Humana 0 7 12 0 2.63
UnitedHealth Group 0 0 21 0 3.00

Humana currently has a consensus price target of $234.89, suggesting a potential downside of 0.26%. UnitedHealth Group has a consensus price target of $199.55, suggesting a potential upside of 4.54%. Given UnitedHealth Group’s stronger consensus rating and higher probable upside, analysts clearly believe UnitedHealth Group is more favorable than Humana.

Risk and Volatility

Humana has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, UnitedHealth Group has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Summary

UnitedHealth Group beats Humana on 12 of the 17 factors compared between the two stocks.

Humana Company Profile

Humana Inc. is a health and well-being company. The Company’s segments include Retail, Group and Specialty, Healthcare Services and Individual Commercial. The Retail segment consists of Medicare benefits, as well as individual commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. The Group and Specialty segment consists of employer group commercial fully insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health. The Healthcare Services segment includes services offered to its health plan members, as well as to third parties, including pharmacy solutions, provider services, home-based services and clinical programs, as well as services and capabilities to manage population health. The Individual Commercial segment includes Individual Commercial products marketed under the HumanaOne brand.

UnitedHealth Group Company Profile

UnitedHealth Group Incorporated is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. It conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. OptumInsight provides services, technology and healthcare solutions to participants in the healthcare industry. OptumRx provides retail network contracting, purchasing and clinical solutions.

Receive News & Ratings for Humana Inc. Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Humana Inc. and related companies with MarketBeat.com's FREE daily email newsletter.