Quest Diagnostics' (NYSE:DGX) Upcoming Dividend Will Be Larger Than Last Year's

The board of Quest Diagnostics Incorporated (NYSE:DGX) has announced that it will be paying its dividend of $0.71 on the 24th of April, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Quest Diagnostics

Quest Diagnostics' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Quest Diagnostics' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 13.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% 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 2013, the dividend has gone from $0.68 total annually to $2.84. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Quest Diagnostics has impressed us by growing EPS at 8.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Quest Diagnostics that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.