Leidos Holdings (NYSE:LDOS) Is Due To Pay A Dividend Of $0.36

Leidos Holdings, Inc. (NYSE:LDOS) has announced that it will pay a dividend of $0.36 per share on the 31st of March. Based on this payment, the dividend yield on the company's stock will be 1.5%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Leidos Holdings

Leidos Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Leidos Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 56.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was $1.92, compared to the most recent full-year payment of $1.44. Doing the maths, this is a decline of about 2.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Leidos Holdings has grown earnings per share at 16% per year over the past five years. Leidos Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Leidos Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Leidos Holdings might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Leidos Holdings 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.