What To Know Before Buying Leidos Holdings Inc (NYSE:LDOS) For Its Dividend
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 6 years, Leidos Holdings Inc (NYSE:LDOS) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Leidos Holdings in more detail.
See our latest analysis for Leidos Holdings
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Is is able to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Leidos Holdings fit our criteria?
Leidos Holdings has a trailing twelve-month payout ratio of 44.16%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 30.21%, leading to a dividend yield of around 2.03%. However, EPS should increase to $3.58, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Leidos Holdings as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Leidos Holdings has a yield of 1.79%, which is high for IT stocks but still below the market’s top dividend payers.
Next Steps:
Whilst there are few things you may like about Leidos Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for LDOS’s future growth? Take a look at our free research report of analyst consensus for LDOS’s outlook.
Valuation: What is LDOS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LDOS is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
