Arthur J. Gallagher's (NYSE:AJG) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Arthur J. Gallagher & Co. (NYSE:AJG) has announced that it will be paying its dividend of $0.65 on the 21st of March, an increased payment from last year's comparable dividend. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Arthur J. Gallagher

Arthur J. Gallagher's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Arthur J. Gallagher's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 66.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 $1.44 in 2015, and the most recent fiscal year payment was $2.60. This means that it has been growing its distributions at 6.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Arthur J. Gallagher Could Grow Its Dividend

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 seen EPS rising for the last five years, at 9.8% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We should note that Arthur J. Gallagher has issued stock equal to 17% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Arthur J. Gallagher Looks Like A Great Dividend Stock

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. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Arthur J. Gallagher that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.