Assessing the Sustainability and Growth of Quest Diagnostics Inc's Dividends
Quest Diagnostics Inc (DGX, Financial) recently announced a dividend of $0.75 per share, payable on 2024-04-22, with the ex-dividend date set for 2024-04-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Quest Diagnostics Inc's dividend performance and assess its sustainability.
What Does Quest Diagnostics Inc Do?
Quest Diagnostics is a leading independent provider of diagnostic testing, information, and services in the U.S. The company generates over 95% of its revenue through clinical testing, anatomic pathology, esoteric testing, and substance abuse testing with specimens collected at its national network of roughly 2,300 patient service centers, as well as multiple doctors offices and hospitals. The firm also runs a much smaller diagnostic solutions segment that provides clinical trials testing, risk assessment services, and information technology solutions.
A Glimpse at Quest Diagnostics Inc's Dividend History
Quest Diagnostics Inc has maintained a consistent dividend payment record since 2004. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Quest Diagnostics Inc's Dividend Yield and Growth
As of today, Quest Diagnostics Inc currently has a 12-month trailing dividend yield of 2.14% and a 12-month forward dividend yield of 2.27%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Quest Diagnostics Inc's annual dividend growth rate was 7.60%. Extended to a five-year horizon, this rate decreased to 4.30% per year. And over the past decade, Quest Diagnostics Inc's annual dividends per share growth rate stands at 7.60%.
Based on Quest Diagnostics Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Quest Diagnostics Inc stock as of today is approximately 2.64%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Quest Diagnostics Inc's dividend payout ratio is 0.34.
Quest Diagnostics Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Quest Diagnostics Inc's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Quest Diagnostics Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Quest Diagnostics Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Quest Diagnostics Inc's revenue has increased by approximately 5.70% per year on average, a rate that underperforms than approximately 60.4% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Quest Diagnostics Inc's earnings increased by approximately -6.00% per year on average, a rate that underperforms than approximately 63.28% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 11.10%, which underperforms than approximately 51.2% of global competitors.
Next Steps
Considering Quest Diagnostics Inc's consistent dividend payments, moderate dividend growth rate, manageable payout ratio, and solid profitability, the dividends appear sustainable. However, the company's growth metrics present a mixed picture, with strong revenue per share growth but underperforming EPS and EBITDA growth rates compared to industry peers. Value investors should weigh these factors when considering Quest Diagnostics Inc as a potential dividend-paying investment. As the healthcare industry continues to evolve, keeping an eye on industry trends and Quest Diagnostics Inc's strategic responses will be key to understanding the future prospects of its dividends.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
