Quest Diagnostics (NYSE:DGX) Has Announced That It Will Be Increasing Its Dividend To $0.75
The board of Quest Diagnostics Incorporated (NYSE:DGX) has announced that it will be paying its dividend of $0.75 on the 22nd of April, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.
See our latest analysis for Quest Diagnostics
Quest Diagnostics' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Quest Diagnostics was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 24.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.
Quest Diagnostics Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.20, compared to the most recent full-year payment of $3.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See Quest Diagnostics' Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Quest Diagnostics has seen EPS rising for the last five years, at 7.3% per annum. Quest Diagnostics definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Quest Diagnostics' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Quest Diagnostics that investors need to be conscious of moving forward. 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.
