Fidelity National Financial (NYSE: FNF) and First American (NYSE:FAF) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, earnings, risk and analyst recommendations.

Dividends

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Fidelity National Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.1%. First American pays an annual dividend of $1.52 per share and has a dividend yield of 2.8%. Fidelity National Financial pays out 52.9% of its earnings in the form of a dividend. First American pays out 55.3% 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. Fidelity National Financial has increased its dividend for 6 consecutive years and First American has increased its dividend for 6 consecutive years. Fidelity National Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

83.0% of Fidelity National Financial shares are owned by institutional investors. Comparatively, 84.9% of First American shares are owned by institutional investors. 5.0% of Fidelity National Financial shares are owned by company insiders. Comparatively, 3.0% of First American shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Fidelity National Financial and First American, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fidelity National Financial 0 1 5 0 2.83
First American 0 1 1 0 2.50

Fidelity National Financial currently has a consensus target price of $44.00, suggesting a potential upside of 11.85%. First American has a consensus target price of $54.50, suggesting a potential downside of 0.98%. Given Fidelity National Financial’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Fidelity National Financial is more favorable than First American.

Profitability

This table compares Fidelity National Financial and First American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fidelity National Financial 8.13% 11.71% 5.76%
First American 7.33% 13.92% 4.90%

Earnings and Valuation

This table compares Fidelity National Financial and First American’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fidelity National Financial $7.26 billion 1.49 $771.00 million $2.27 17.33
First American $5.77 billion 1.06 $423.04 million $2.75 20.01

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

Volatility and Risk

Fidelity National Financial has a beta of 0.83, suggesting that its stock price is 17% less volatile than the S&P 500. Comparatively, First American has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500.

Summary

Fidelity National Financial beats First American on 13 of the 16 factors compared between the two stocks.

About Fidelity National Financial

Fidelity National Financial, Inc., together with its subsidiaries, provides title insurance, technology, and transaction services to the real estate and mortgage industries in the United States. The company operates in Title, and Corporate and Other segments. It offers title insurance, escrow, and other title related services, including collection and trust activities, trustee sales guarantees, recordings and conveyances, and home warranty insurance. The company also offers other title related services used in the production and management of mortgage loans. In addition, it engages in real estate brokerage business. Fidelity National Financial, Inc. was founded in 1847 and is headquartered in Jacksonville, Florida.

About First American

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Specialty Insurance segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services. This segment also provides closing and/or escrow services; products, services, and solutions involving the use of real property related data to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, default-related products and services, and title evidence services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant records and images. This segment offers its products through a network of direct operations and agents in 49 states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, South Korea, and internationally. The Specialty Insurance segment provides property and casualty insurance comprising coverage to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism, and other types of property damage. It also offers residential service contracts that cover residential systems, such as heating and air conditioning systems, and appliances against failures that occur as the result of normal usage during the coverage period; and offers auto insurance products. This segment markets its property and casualty insurance products through direct distribution channels, including cross-selling through its existing closing-service activities, as well as through a network of independent brokers. First American Financial Corporation was founded in 1889 and is based in Santa Ana, California.

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