Yahoo Finance Aon (NYSE:AON) Is Increasing Its Dividend To $0.675
The board of Aon plc (NYSE:AON) has announced that the dividend on 15th of May will be increased to $0.675, which will be 9.8% higher than last year's payment of $0.615 which covered the same period. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.
View our latest analysis for Aon
Aon's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Aon's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 49.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
Aon Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.70 in 2014 to the most recent total annual payment of $2.46. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
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. We are encouraged to see that Aon has grown earnings per share at 24% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Aon's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Aon (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
