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The board of Aon plc (NYSE:AON) has announced that it will be paying its dividend of $0.745 on the 15th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.
We've discovered 1 warning sign about Aon. View them for free.
Aon's Projected Earnings Seem Likely To Cover Future Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Aon's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 48.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.
See our latest analysis for Aon
Aon Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $1.00 total annually to $2.98. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Aon 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 Aon'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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Aon that investors should know about before committing capital to this stock. Is Aon not quite the opportunity you were looking for? Why not check out our selection of top 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.