Arthur J Gallagher & Co. Hikes Dividend

The board of Arthur J Gallagher & Co. (AJG) approved a 2.9% increase in its quarterly cash dividend. The insurance broker will now pay a quarterly dividend of 36 cents per share, up from prior payout of 35 cents. The newly declared dividend will be paid on Mar 20, 2014 to shareholders of record as on Mar 4, 2014.

Based on yesterday’s closing share price of $48.44, the increased dividend of Arthur J Gallagher & Co. implies a dividend yield of 2.97%, which is better than the industry average yield of 2.62%.

The dividend hike by Arthur J Gallagher & Co. was primarily supported by its strong operating cash flow that allows the company to engage in investments and successfully deploy excess capital, thereby increasing returns of the shareholders. Overall, the dividend increase reflects the company’s strong capital position and a consolidated balance sheet.

Arthur J Gallagher & Co. has been consistently distributing additional profit among its shareholders through quarterly dividends for the last few years. We note that the quarterly dividend has increased at a 4-year CAGR of 2.99%.

Besides delivering dividends consistently, Arthur J Gallagher & Co. is also focused on ramping up its inorganic growth profile. It has made eleven acquisitions during the fourth quarter of 2013 to augment its product and service offerings as well as leverage its international footprint. With an expected long-term growth for Arthur J Gallagher & Co. of 13.9%, we believe these initiatives should aid higher earnings of the company, going forward. Arthur J Gallagher & Co. is set to release its fourth-quarter 2013 earnings results on Jan 28, 2014.

Among other insurance brokers, Brown & Brown Inc. (BRO) increased its quarterly dividend from 9 cents a share to 10 cents in Oct 2013.

Arthur J Gallagher & Co. presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the finance sector include Lincoln National Corporation (LNC) and Marsh & Mclennan Companies, Inc. (MMC). Both these stocks carry a Zacks Rank #2 (Buy).

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