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

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

See our latest analysis for Arthur J. Gallagher

Arthur J. Gallagher's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Arthur J. Gallagher was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 81.3% over the next year. 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

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.36 in 2013, and the most recent fiscal year payment was $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

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 10% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Arthur J. Gallagher that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.