Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Arthur J. Gallagher & Co. (NYSE:AJG) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 3rd of September will not receive the dividend, which will be paid on the 18th of September.

Arthur J. Gallagher's next dividend payment will be US$0.45 per share. Last year, in total, the company distributed US$1.80 to shareholders. Based on the last year's worth of payments, Arthur J. Gallagher stock has a trailing yield of around 1.7% on the current share price of $105.05. If you buy this business for its dividend, you should have an idea of whether Arthur J. Gallagher's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Arthur J. Gallagher

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Arthur J. Gallagher's payout ratio is modest, at just 46% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Arthur J. Gallagher's earnings per share have risen 14% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Arthur J. Gallagher has lifted its dividend by approximately 3.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Arthur J. Gallagher is keeping back more of its profits to grow the business.

The Bottom Line

Should investors buy Arthur J. Gallagher for the upcoming dividend? Companies like Arthur J. Gallagher that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Arthur J. Gallagher appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.