Quest Diagnostics' (NYSE:DGX) dividend was increased by 13%. Its overall yield is above that of the Standard & Poor's 500 Index at 2.06%. The firm has paid a dividend since January 2004.
Quest Diagnostics is a provider of health care diagnostic testing primarily in the U.S. The company generates nearly all its revenue from clinical testing through more than 2,000 testing centers. The testing the firm completes for patients includes routine blood testing and screening, genetic testing and testing for drug abuse. The large-cap health care company also manufactures diagnostic products such as Care360 HER.
Care360 is a health care information technology product. The products assist physicians in managing care better through electronic record keeping and also by storing patient information in patient portals. It also offers a content management system known as CharMaxx.
Quest works under several other brands including Athena, Solstas, Summit, AmeriPath and Dermpath. The firm was founded in 1967 and is headquartered in Madison, New Jersey.
Quest Diagnostics has maintained a three-year growth rate of dividends of 9.7%. Quest Diagnostics currently ranks first in yield within the large cap health care, medical laboratories and research category.The quarterly dividend for the January payment will be 45 cents per share versus the prior year rate of 40 cents per share.
The dividend will be paid at the new higher rate on Jan. 25, 2017, to shareholders of record at the close of business on Jan. 10, 2017. Quest Diagnostics is currently priced at $87.29. Listed in the table below are the quarterly dividend payments since 2010.
| Date | Quarterly Dividend |
| Jan. 10, 2017 | 45 cents |
| Sept. 30 | 40 cents |
| July 1 | 40 cents |
| April 4 | 40 cents |
| Jan. 8 | 38 cents |
| Oct. 2, 2015 | 38 cents |
| July 6, 2015 | 38 cents |
| April 6, 2015 | 38 cents |
| Jan. 9, 2015 | 33 cents |
| Oct. 3, 2014 | 33 cents |
| July 7, 2014 | 33 cents |
| April 4, 2014 | 33 cents |
| Jan. 3, 2014 | 30 cents |
| Sept. 27, 2013 | 30 cents |
| June 28, 2013 | 30 cents |
| March 28, 2013 | 30 cents |
| Jan. 9, 2013 | 30 cents |
| Sept. 27, 2012 | 17 cents |
| June 29, 2012 | 17 cents |
| March 30, 2012 | 17 cents |
| Jan. 5, 2012 | 17 cents |
| Oct. 5, 2011 | 10 cents |
| June 30, 2011 | 10 cents |
| April 1, 2011 | 10 cents |
| Jan. 6, 2011 | 10 cents |
| Sept. 30, 2010 | 10 cents |
| July 1, 2010 | 10 cents |
| April 1, 2010 | 10 cents |
Quantitative analysis
I examine Quest Diagnostics with my five key criteria, which include:
| Category | Value | Score |
| Dividend yield | 2.06% | 277 |
| Dividend growth (three- to six-year average) | 18.8% | 97 |
| Forward P/E | 15.92 | 121 |
| S&P financial rating | BBB+ | 160 |
| Beta | 0.90 | 100 |
| Total Score | 755 |
Additional quantitative information on price-sales (P/S) ratio and historical yield:
| % Yield | 3 Year Div. Growth Rate | 6 Year Div. Growth Rate | SPS 2016 | P/S Ratio | 10 yr P/S Low | 10 yr P/S High | 5 yr lowest Yield % | 5 yr max Yield % |
| 2.06% | 9.7% | 27.8% | 53.7 | 1.63 | 0.95 | 2.11 | 0.68% | 2.51% |
Positives
- Quest Diagnostics' dividend yield is above that of the S&P 500 Index.
- Quest Diagnostics has paid out a dividend consecutively for the last 12 years.
- Quest Diagnostics' forward price-earnings (P/E) ratio is near 16, below the average of the market.
- Quest Diagnostics' current dividend yield (2.06%) is above its five-year average historical dividend yield of 1.60%.
- Quest Diagnostics maintains a beta of 0.90, lower than the average company.
Negatives
- Quest Diagnostics is trading slightly above its 10-year average P/S average.
Latest earnings and overall analysis
Quest Diagnostics issued its earnings data on Oct. 20. The company reported $1.37 earnings per share for the quarter, beating the average estimate by 2 cents. The firm had revenue of $1.89 billion for the quarter, much higher than the consensus estimate of $1.53 billion. Quest followed up on Nov. 11 with updated guidance on earnings. The company provided earnings per share guidance of $5.07 to $5.12 for the period. The estimate was inline with prior estimates of $5.10 per share for the next fiscal year.
The firm has been a stalwart in the messy health care sector this year. Its shares reached a new 52-week price high of $87.48 on Nov. 21. The stock has gained nearly 30% over the past year.
The company basically operates as a duopoly with competitor LabCorp. These two firms dominate the testing business and have a large barrier for any new competitors in the independent diagnostic testing landscape. Like LabCorp, the company has stayed to its bread and butter, testing. It has initiated a relationship with HCA Hospitals to set up inpatient lab testing. It also has diversified into resting for employees with Safeway (SWY, Financial) and even providing genetic testing for Ancestry.com It also started QuestDirect. It is a new direct patient service where customers in Missouri and Colorado can order lab tests without a doctor's script.
Overall Quest Diagnostics is a solid company in its category. It is one of the few companies in the health care sector to actually meet financial results in the third quarter. Despite the dramatic price rise in the past year, Quest trades at a modest 16 times next year's earnings estimates. With its recent 13% dividend hike, the firm offers investors a yield of over 2%. It does trade at a modestly high P/S ratio, but maintains a below market beta. Due to these factors, Quest Diagnostics qualifies as a member of our Top 100 Dividend Stocks at #85.
Disclosure: I have no position in Quest Diagnostics.
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