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Aon Plc (NYSE:AON) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Simply Wall St
·3 min read

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Aon Plc (NYSE:AON) is about to go ex-dividend in just four days. You will need to purchase shares before the 30th of October to receive the dividend, which will be paid on the 13th of November.

Aon's upcoming dividend is US$0.46 a share, following on from the last 12 months, when the company distributed a total of US$1.76 per share to shareholders. Looking at the last 12 months of distributions, Aon has a trailing yield of approximately 0.9% on its current stock price of $207.31. If you buy this business for its dividend, you should have an idea of whether Aon's dividend is reliable and sustainable. As a result, readers should always check whether Aon has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Aon

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Aon paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Aon earnings per share are up 9.8% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aon has delivered 12% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Aon worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Aon appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Aon is facing. Our analysis shows 1 warning sign for Aon and you should be aware of this before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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