Labcorp Holdings (NYSE:LH) Has Announced A Dividend Of $0.72

Labcorp Holdings Inc. (NYSE:LH) will pay a dividend of $0.72 on the 12th of March. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

View our latest analysis for Labcorp Holdings

Labcorp Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Labcorp Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 78.0%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

Labcorp Holdings Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The payments haven't really changed that much since 3 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Labcorp Holdings May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Labcorp Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Labcorp Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we think Labcorp Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. For instance, we've picked out 1 warning sign for Labcorp Holdings that investors should take into consideration. 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.