The board of Marsh & McLennan Companies, Inc. (NYSE:MMC) has announced that the dividend on 15th of August will be increased to $0.59, which will be 10% higher than last year's payment of $0.535 which covered the same period. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.
Marsh & McLennan Companies' Earnings Easily Cover the Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Marsh & McLennan Companies was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 25.0%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
Marsh & McLennan Companies Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.88, compared to the most recent full-year payment of $2.14. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Marsh & McLennan Companies has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Marsh & McLennan Companies' prospects of growing its dividend payments in the future.
Marsh & McLennan Companies 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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Marsh & McLennan Companies that investors should take into consideration. Is Marsh & McLennan Companies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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