Quest Diagnostics Incorporated's (NYSE:DGX) dividend will be increasing from last year's payment of the same period to $0.80 on 21st of April. This takes the dividend yield to 1.9%, which shareholders will be pleased with.

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Quest Diagnostics' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Quest Diagnostics was easily earning enough to 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 33.6%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Quest Diagnostics

Quest Diagnostics Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was $1.32, compared to the most recent full-year payment of $3.20. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Quest Diagnostics has only grown its earnings per share at 4.6% per annum over the past five years. If Quest Diagnostics is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Quest Diagnostics' Dividend

Overall, a dividend increase is always good, and we think that Quest Diagnostics is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Quest Diagnostics that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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