Arthur J. Gallagher's (NYSE:AJG) Upcoming Dividend Will Be Larger Than Last Year's

The board of Arthur J. Gallagher & Co. (NYSE:AJG) has announced that it will be increasing its dividend by 7.8% on the 17th of March to $0.55, up from last year's comparable payment of $0.51. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

Check out our latest analysis for Arthur J. Gallagher

Arthur J. Gallagher's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Arthur J. Gallagher's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 61.6%. 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 an extended history of paying stable dividends. Since 2013, the annual payment back then was $1.36, compared to the most recent full-year payment of $2.04. This means that it has been growing its distributions at 4.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.