Arthur J. Gallagher (NYSE:AJG) Is Increasing Its Dividend To $0.55

Arthur J. Gallagher & Co. (NYSE:AJG) will increase its dividend from last year's comparable payment on the 15th of September to $0.55. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

View our latest analysis for Arthur J. Gallagher

Arthur J. Gallagher's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Arthur J. Gallagher's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 81.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Arthur J. Gallagher Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.36 in 2013 to the most recent total annual payment of $2.20. This means that it has been growing its distributions at 4.9% per annum 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Arthur J. Gallagher has grown earnings per share at 10% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Arthur J. Gallagher's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Arthur J. Gallagher that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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