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Readers hoping to buy Arthur J. Gallagher & Co. (NYSE:AJG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Arthur J. Gallagher's shares before the 3rd of June to receive the dividend, which will be paid on the 18th of June.
The company's next dividend payment will be US$0.48 per share, and in the last 12 months, the company paid a total of US$1.92 per share. Last year's total dividend payments show that Arthur J. Gallagher has a trailing yield of 1.3% on the current share price of $146.61. If you buy this business for its dividend, you should have an idea of whether Arthur J. Gallagher's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Arthur J. Gallagher paying out a modest 41% of its earnings.
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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Arthur J. Gallagher's earnings per share have risen 16% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Arthur J. Gallagher has increased its dividend at approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Arthur J. Gallagher is keeping back more of its profits to grow the business.
Is Arthur J. Gallagher worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Arthur J. Gallagher ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Arthur J. Gallagher has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Arthur J. Gallagher and you should be aware of these before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
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