Updated 3/5/25

Aon plc (NYSE: AON) is a powerhouse in the risk management and insurance brokerage industry, operating across more than 120 countries. It’s not just about insurance; Aon has built a strong consulting business that helps corporations navigate complex risks, optimize employee benefits, and improve financial stability.

While it may not be the first name that comes to mind for income-focused investors, Aon has quietly rewarded shareholders with steady dividend increases and aggressive share buybacks. This isn’t a high-yield stock, but for those who prioritize long-term dividend growth and strong capital appreciation, Aon has a lot to offer.

Let’s dive into its dividend metrics, financial strength, and potential risks to see how it fits into a dividend investor’s portfolio.

Key Dividend Metrics

📌 Dividend Yield: 0.67%
📌 Annual Dividend Payout: $2.70 per share
📌 5-Year Dividend Growth Rate: 8.6%
📌 Payout Ratio: 21.14%
📌 Consecutive Dividend Increases: 12 years
📌 Next Ex-Dividend Date: February 3, 2025
📌 Next Payment Date: February 14, 2025

Dividend Overview

At first glance, Aon’s dividend yield of 0.67% might seem underwhelming compared to traditional income stocks. But there’s more to the story. Aon has a strong track record of raising its dividend year after year, backed by solid earnings and cash flow growth.

The payout ratio of just 21.14% means the company is distributing only a small fraction of its profits, leaving plenty of room for future increases. Aon has also been an aggressive buyer of its own stock, which helps boost earnings per share and supports future dividend hikes.

One thing to note is that Aon’s yield is slightly below its five-year average of 0.77%. This suggests the stock has seen strong price appreciation, which has kept the yield lower. While it may not be the best choice for someone seeking immediate income, it offers a reliable and growing stream of dividends over time.

Dividend Growth and Safety

Aon has increased its dividend for 12 straight years, growing at an average rate of 8.6% annually over the past five years. That kind of steady growth helps offset inflation and enhances long-term returns.

From a safety standpoint, Aon’s dividend is rock-solid. The company generates billions in free cash flow, and with a low payout ratio, there’s plenty of flexibility to continue raising the dividend even if the economy slows down.

Another important factor is share buybacks. Aon consistently repurchases shares, reducing the number of outstanding shares and making dividend growth more manageable. This strategy has been a major driver of the company’s long-term stock performance.

Chart Analysis

Aon’s stock chart tells a compelling story of momentum, trend strength, and potential areas of interest for investors.

Starting with the big picture, the stock has been in a strong uptrend since mid-2024, steadily climbing higher with well-formed pullbacks that created opportunities for buyers to step in. The 50-day moving average (orange line) has been acting as a dynamic support level, while the 200-day moving average (blue line) is trending upward, confirming long-term strength.

The stock recently touched a new high of $407, but it closed slightly lower at $404.07 on March 5. This suggests some resistance at this level, as sellers took profits after a strong run-up. However, the fact that the price remains above both moving averages indicates that the uptrend is intact.

Volume and Market Participation

Volume tells a crucial part of the story. The most recent session saw a trading volume of 1.459 million shares, which is relatively in line with previous sessions. There’s no extreme spike in volume, meaning the current price action isn’t driven by an unusual influx of buyers or sellers.

Looking at past volume patterns, there were some significant spikes in May and throughout the latter half of 2024, indicating strong accumulation. Since then, volume has been more stable, which suggests that institutions or long-term investors are holding onto shares rather than dumping them.

Relative Strength Index (RSI)

The RSI indicator at the bottom of the chart is showing a reading near 70, which signals that the stock is approaching overbought territory. This doesn’t necessarily mean a pullback is imminent, but it does indicate that buying momentum has been strong. If the RSI pushes too far into overbought levels, some short-term profit-taking could occur before the next move higher.

Recent Candlestick Behavior

The last five candles provide a snapshot of short-term market sentiment. The most recent candle had a long upper wick, meaning the stock pushed higher intraday but encountered some selling pressure before the close. This suggests that while buyers are still active, there is some hesitation at the current price level.

The previous sessions showed a mix of small-bodied candles with relatively short wicks, indicating steady buying pressure without major volatility. There were no clear signs of a reversal pattern, such as a bearish engulfing candle or strong selling pressure, which means the trend is still intact for now.

Key Levels to Watch

• Support: The 50-day moving average (~$375) has been a strong support level, and any dip toward this area could attract buyers.
• Resistance: The recent high of $407 is the key resistance level. A clear breakout above this could lead to further upside, while failure to push through could result in some consolidation or a pullback.
• RSI Levels: If RSI crosses well above 70, a short-term cooldown might occur before another leg up.

This chart reflects strong momentum, but the next few sessions will be key in determining whether Aon pushes higher or takes a breather.

Analyst Ratings

Aon plc has recently received a mix of analyst upgrades and downgrades, reflecting varying opinions on its valuation, growth potential, and market conditions.

Upgrades:

• A major investment firm recently upgraded Aon from “Equal-Weight” to “Overweight,” citing strong fourth-quarter earnings and improved operational efficiencies. Analysts pointed to the company’s ability to generate consistent free cash flow and maintain pricing power in the risk management sector as key reasons for the positive outlook. The firm also raised its price target, reflecting confidence in Aon’s long-term strategy.
• Another analyst group reaffirmed its “Outperform” rating on Aon, slightly increasing the price target. Their view was driven by steady revenue growth, effective cost management, and a favorable outlook for Aon’s advisory services segment, which continues to expand at a healthy pace.

Downgrades:

• A different research firm opted to take a more cautious stance, maintaining a “Neutral” rating while slightly increasing the price target. Their rationale centered on valuation concerns, as Aon’s stock has already surged significantly in recent months. They believe the current price reflects much of the anticipated growth, leaving limited upside potential in the near term.
• Another major financial institution maintained a “Sector Perform” rating while adjusting its price target modestly higher. The analysts acknowledged Aon’s strong fundamentals but expressed concerns about broader macroeconomic uncertainties and potential headwinds in the insurance brokerage industry.

Consensus Price Target:

The consensus price target for Aon currently sits around $386.21, suggesting a measured view among analysts. Some see continued strength in Aon’s business model and growth strategy, while others believe the stock’s recent rally limits further immediate gains. The mixed ratings reflect a balanced perspective, with analysts closely watching for catalysts that could drive the next move in the stock.

Earnings Report Summary

Aon’s latest earnings report showed strong growth across the board, with revenue climbing significantly thanks to a mix of organic expansion and strategic acquisitions. The company wrapped up the fourth quarter of 2024 on a high note, posting $4.1 billion in revenue, a 23% jump compared to the same period last year. A big part of this was the recent acquisition of NFP, which added to overall earnings, but even without that, Aon’s organic revenue growth was up 6%, showing that core business remains strong.

Breaking things down a bit further, the Risk Capital segment saw revenue increase by 13% to $2.5 billion, while the Human Capital side of the business surged 41% to $1.6 billion. Both divisions benefited from strong client retention and a steady stream of new business.

Of course, with growth comes higher expenses. Operating costs were up 18%, totaling $3.1 billion for the quarter. This was largely due to the costs associated with integrating NFP, higher amortization expenses, and some strategic investments for future growth. However, the company did manage to realize $40 million in restructuring savings, which helped offset some of the additional spending.

Looking at free cash flow, Aon generated $2.8 billion in 2024, which was down 11% from the previous year. While that might raise some eyebrows, a big reason for the decline was lower operational cash flow rather than reckless spending. Plus, capital expenditures were slightly lower than last year, meaning the company is keeping a close eye on its investments.

On the revenue side, all of Aon’s major business units performed well:

• Commercial Risk Solutions saw 6% organic revenue growth, thanks to strong demand in property & casualty insurance and M&A advisory.
• Reinsurance Solutions also gained 6%, fueled by net new business and a solid performance in the Strategy and Technology Group.
• Health Solutions added 5% growth, with particular strength in global health and benefits services.
• Wealth Solutions led the way with 8% organic growth, driven by demand for pension de-risking services and regulatory consulting.

Overall, Aon continues to execute its strategy well, balancing steady growth with disciplined financial management. The latest report shows that the company remains on solid footing, benefiting from a strong client base and a business model that holds up even in uncertain economic conditions.

Financial Health and Stability

Profitability and Growth

Aon runs a highly profitable business, with an operating margin of nearly 40% and a net profit margin of 16.91%. These are impressive numbers that highlight the company’s ability to generate strong earnings on every dollar of revenue.

Its return on equity (ROE) is a staggering 95.64%. While that’s partially due to its capital structure, it still underscores Aon’s ability to deliver strong shareholder returns.

Growth-wise, Aon is firing on all cylinders. Revenue jumped 22.9% year-over-year in the last quarter, while earnings grew 43.8% over the same period. That kind of performance is what allows the company to keep rewarding investors with dividend increases and share buybacks.

Debt and Liquidity

One potential concern is Aon’s debt. The company carries $17.89 billion in total debt, leading to a high debt-to-equity ratio of 278.26%. While Aon has historically managed its debt well, it’s something investors should keep an eye on.

On the plus side, the company generates more than $3 billion in operating cash flow annually, which helps offset the risks associated with high leverage. Its current ratio of 1.02 suggests it has enough liquidity to cover short-term obligations without issues.

Valuation and Stock Performance

Is Aon Overpriced?

Aon isn’t a bargain stock at current levels. Its trailing price-to-earnings (P/E) ratio is 32.35, well above the market average. However, its forward P/E of 23.20 suggests that analysts expect strong earnings growth ahead.

Another valuation metric to consider is the price-to-sales ratio, which stands at 5.47. That’s on the higher end for an insurance and consulting firm, but Aon’s high margins and earnings consistency justify a premium valuation.

The company’s price-to-book ratio is 14.26, which is quite steep. However, this is a capital-light business that doesn’t require a lot of physical assets to generate revenue, so traditional book value metrics are less relevant here.

Stock Performance

Aon has been a winner for long-term investors. Over the past year, the stock has climbed nearly 28%, significantly outperforming the broader market.

Right now, shares are trading near their 52-week high of $412.97, with a 50-day moving average of $374.95 and a 200-day moving average of $345.09. This suggests strong momentum, though it also means the stock isn’t cheap.

Compared to the S&P 500’s 13.29% annual return, Aon has been a standout performer.

Risks and Considerations

High Valuation

Aon’s stock isn’t cheap. Investors are paying a premium for its steady growth and strong margins. If earnings growth slows or the market corrects, the stock could see a pullback.

Debt Load

The company’s high debt levels aren’t an immediate concern, but rising interest rates could increase borrowing costs over time. If Aon slows its share buybacks to focus on debt repayment, it could impact future earnings growth.

Economic Sensitivity

While Aon operates in a stable industry, it’s not completely immune to economic downturns. If businesses cut back on insurance spending or consulting services, Aon’s revenue growth could slow.

Low Dividend Yield

For investors looking for immediate income, Aon’s 0.67% yield may not be appealing. This is a dividend growth stock rather than a high-yield play, so it’s better suited for those with a long-term focus.

Final Thoughts

Aon is a great example of a stock that prioritizes steady dividend growth over high current yield. It has a strong business model, high margins, and a shareholder-friendly approach that includes both dividends and aggressive stock buybacks.

The company’s low payout ratio, consistent earnings growth, and free cash flow generation make it a reliable choice for long-term investors who value stability. However, the stock isn’t cheap, and its debt levels should be monitored.

For those willing to accept a lower starting yield in exchange for long-term compounding, Aon remains an attractive holding in a dividend growth portfolio.

This is not a stock for those seeking immediate income, but for investors who appreciate a disciplined, cash-rich business with a history of rewarding shareholders, Aon checks many of the right boxes.