Aon's (NYSE:AON) Upcoming Dividend Will Be Larger Than Last Year's

Aon plc (NYSE:AON) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of May to $0.745. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

We've discovered 1 warning sign about Aon. View them for free.

Aon'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, prior to this announcement, Aon's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 48.9% over the next year. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

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Aon Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $1.00 total annually to $2.98. This means that it has been growing its distributions at 12% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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 Aon has grown earnings per share at 14% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Aon Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Aon 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Aon that investors need to be conscious of moving forward. Is Aon not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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