Labcorp Holdings Inc. (NYSE:LH) will pay a dividend of $0.72 on the 11th of June. This means that the annual payment will be 1.3% of the current stock price, which is in line with the average for the industry.
Labcorp Holdings' Future Dividend Projections Appear Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Labcorp Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 76.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.
See our latest analysis for Labcorp Holdings
Labcorp Holdings Doesn't Have A Long Payment History
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 most recent annual payment of $2.88 is about the same as the annual payment 3 years ago. Labcorp Holdings hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Although it's important to note that Labcorp Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Labcorp Holdings has the option to increase the payout ratio to return more cash to shareholders.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Labcorp Holdings 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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