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Aon Increases Dividend by 11%

Zacks Equity Research

Recently, the board of Aon plc (AON) approved an 11% hike in its annual dividend on Class A Ordinary Shares to 70 cents per share from 63 cents paid earlier. This translates into a quarterly cash dividend of 17.5 cents per share, increasing from 15.75 cents paid earlier. The increased dividend will be paid on May 15, 2013, to shareholders of record as of May 1, 2013.

Aon will require $218.1 million every quarter for the dividend payment, based on the outstanding share count of 311.6 million as of Jan 31, 2013. The company has ample liquidity for the payment, with cash and cash equivalents of $291 million as of Dec 31, 2012 and operating cash flow of $1.42 billion in 2012.

The new dividend translates into an annual dividend yield of 1.13%, based on the closing share price of $62.11 as of Apr 16, 2013. However, this is still below the industry yield of 1.91% as well as of other insurance brokers, Willis Group Holdings plc (WSH), with a dividend yield of 2.87%, Brown & Brown Inc. (BRO), with a dividend yield of 1.16%, and Marsh & McLennan Companies Inc. (MMC), with a dividend yield of 2.41%.

Aon has been regularly paying a quarterly cash dividend since Aug 1999. The company increased its dividend by 5% in April last year.

Aon is expected to announce its first-quarter 2013 financial results before the opening bell on Apr 26, 2013. The Zacks Consensus Estimate for the company’s first-quarter earnings stands at $1.11 per share, up 12.83% from the year-ago quarter.

Aon currently carries a Zacks Rank #3 (Hold).

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