Arthur J. Gallagher & Co. (NYSE:AJG) has announced that it will be increasing its periodic dividend on the 17th of March to $0.55, which will be 7.8% higher than last year's comparable payment amount of $0.51. Even though the dividend went up, the yield is still quite low at only 1.1%.
View our latest analysis for Arthur J. Gallagher
Arthur J. Gallagher's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, Arthur J. Gallagher's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 61.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.
Arthur J. Gallagher Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $1.36 total annually to $2.04. This means that it has been growing its distributions at 4.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Arthur J. Gallagher has been growing its earnings per share at 14% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like Arthur J. Gallagher's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Arthur J. Gallagher that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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