AON's Rising Dividend: A Comforting Signal or Cause for Concern?

Aon plc AON recently announced a 10% dividend hike for its Class A ordinary shares, showcasing its strong financial position and a positive signal for long-term investors. 

The quarterly cash dividend now stands at 74.5 cents per share ($2.98 on an annualized basis), a nice jump from the earlier amount of 67.5 cents per share. Based on the stock’s April 11 closing price of $376.30, the new dividend yield is 0.79%, which is below the industry average of 0.98%. 

AON bought back shares worth $800 million in 2023 and $1 billion in 2024. It had around $2.3 billion of authorization left under its buyback program as of Dec. 31, 2024. Its dividend history shows that it has hiked dividends annually for the past decade. Will this feat continue? Let’s check its financial position.

AON’s Financial Position

AON exited the fourth quarter with cash and cash equivalents of $1.1 billion, which increased 39.5% from the 2023-end level. Long-term debt was $16.3 billion, which rose 62.7% from the 2023-end level. Its long-term debt-to-capital of 72.2% is significantly higher than the industry average of 50.6%. Also, free cash flow decreased 11.5% year over year to $2.8 billion in 2024.

Better Days Ahead for AON?

The company is gearing up for a significantly improved performance in 2025, which should help enhance its shareholder value. Aon has been focusing on acquisitions and partnerships as key strategies for growth, and it has completed several buyouts in recent years. These acquisitions primarily target the expansion of the health and benefits sector, flood insurance solutions, and overall risk and insurance operations.

Its 2025 revenues are expected to rise in the mid-single digits or more from the 2024 level of $15.7 billion. With an adjusted operating margin and increased NFP performance, the company is expected to deliver strong EPS growth in 2025.

AON Stock Price Performance

AON shares have rallied 23.3% in the past year, underperforming the industry’s 32.9% rise.

AON’s Zacks Rank & Key Picks

AON’s financial position does not garner confidence. It currently has a Zacks Rank #4 (Sell). 

Some better-ranked players in the broader Finance space include OppFi Inc. OPFI, PagSeguro Digital Ltd. PAGS and BGC Group, Inc. BGC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for OppFi’s current-year earnings of $1.07 per share has witnessed two upward revisions in the past 60 days against none in the opposite direction. OppFi beat earnings estimates in each of the trailing four quarters, with the average surprise being 73%. The consensus estimate for current-year revenues is pegged at $576.9 million, implying 9.7% year-over-year growth.

The Zacks Consensus Estimate for PagSeguro Digital’s current-year earnings of $1.25 per share has witnessed three upward revisions in the past 60 days against none in the opposite direction. PagSeguro Digital beat earnings estimates in each of the trailing four quarters, with the average surprise being 9.3%. The consensus estimate for current-year revenues is pegged at $3.6 billion, indicating 3.2% year-over-year growth.

The Zacks Consensus Estimate for BGC Group’s current-year earnings of $1.22 per share has witnessed one upward revision in the past seven days against none in the opposite direction. BGC Group beat earnings estimates in each of the trailing four quarters, with the average surprise being 3.3%. The consensus estimate for current-year revenues is pegged at $2.7 billion, suggesting 20.4% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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