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Arthur J. Gallagher & Co.'s (NYSE:AJG) dividend will be increasing from last year's payment of the same period to $0.55 on 16th of June. Even though the dividend went up, the yield is still quite low at only 1.0%.
View our latest analysis for Arthur J. Gallagher
Arthur J. Gallagher's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Arthur J. Gallagher was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 57.2%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.
Arthur J. Gallagher Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $1.36 in 2013, and the most recent fiscal year payment was $2.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Arthur J. Gallagher has impressed us by growing EPS at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Arthur J. Gallagher's prospects of growing its dividend payments in the future.
Arthur J. Gallagher Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Arthur J. Gallagher is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Arthur J. Gallagher that investors should know about before committing capital to this stock. Is Arthur J. Gallagher not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.