Arthur J. Gallagher's (NYSE:AJG) Dividend Will Be Increased To $0.60

Arthur J. Gallagher & Co.'s (NYSE:AJG) periodic dividend will be increasing on the 15th of March to $0.60, with investors receiving 9.1% more than last year's $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

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Arthur J. Gallagher's 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 128.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Arthur J. Gallagher Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.40 in 2014, and the most recent fiscal year payment was $2.20. This means that it has been growing its distributions at 4.6% 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 Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Arthur J. Gallagher has impressed us by growing EPS at 5.2% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

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. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for Arthur J. Gallagher that you should be aware of before investing. 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.