Arthur J. Gallagher's (NYSE:AJG) Dividend Will Be Increased To $0.55

Arthur J. Gallagher & Co. (NYSE:AJG) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of June to $0.55. Even though the dividend went up, the yield is still quite low at only 1.0%.

See our latest analysis for Arthur J. Gallagher

Arthur J. Gallagher's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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.

The next year is set to see EPS grow by 56.6%. 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 a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $1.36 total annually to $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. It's encouraging to see that Arthur J. Gallagher has been growing its earnings per share at 13% a 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.

We Really Like Arthur J. Gallagher's Dividend

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. 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.

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 instance, we've picked out 3 warning signs for Arthur J. Gallagher that investors should take into consideration. Is Arthur J. Gallagher 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.