Quest Diagnostics Inc (NYSE:DGX): A Dividend Stock Analysis for Income Investors

For investors looking for dependable income, dividend investing is a basic strategy centered on firms that regularly pay out profits to shareholders. A methodical way to find these chances uses filters for stocks with good dividend traits and sound fundamental condition. This process favors firms with strong dividend ratings, confirming lasting payouts, while also needing sufficient earnings and financial soundness to keep up continued payments. By selecting for these combined features, investors can find firms set to provide steady income across different market environments.

Dividend Strength and Lasting Quality

Quest Diagnostics Inc (NYSE:DGX) offers a strong example for dividend-oriented investors, receiving a ChartMill Dividend Rating of 7 out of 10. The firm displays several traits that dividend investors usually look for:

• A good dividend yield of 1.73% that is higher than 88% of similar firms
• A steady dividend growth history with yearly increases averaging 6.92% in recent years
• A continuous dividend payment history lasting more than ten years
• A manageable payout ratio of 36.03%, showing significant capacity to keep up payments

The firm's dividend plan matches what income investors usually value, consistent growth instead of a very high present yield. This method often shows management's belief in future earnings reliability and dedication to shareholder returns. The reasonable payout ratio offers a safety margin, letting the firm fund its operations while keeping dividend payments even in weaker economic times.

Earnings Supporting Dividend Payments

Quest Diagnostics holds a good earnings base with a ChartMill Profitability Rating of 7, giving important backing for its dividend plan. The firm's ability to earn shows why filtering for earnings is key when reviewing dividend stocks, without steady profits, dividend payments become hard to maintain. Important earnings measures include:

• Return on Equity of 13.27%, better than 80% of industry rivals
• Sound profit margins of 8.88%, putting the firm in the top tier of its industry
• Operating margin of 14.71%, above 86% of sector peers
• Positive earnings and operating cash flow over the last five years

These earnings numbers show the firm creates enough profits to easily handle its dividend needs while paying for its ongoing activities. The reliable cash flow creation supplies the actual money required for dividend payments, making the payout safer than for firms that need to borrow or sell assets to pay dividends.

Financial Condition Review

With a ChartMill Health Rating of 5, Quest Diagnostics shows acceptable financial soundness, though with some points to watch. The health rating review is meaningful for dividend investors since firms under financial pressure often cut or stop dividends to save cash. The firm's financial state displays:

• An acceptable Altman-Z score of 3.23, showing little short-term bankruptcy danger
• Debt-to-free-cash-flow ratio of 4.07, superior to 73% of industry peers
• Steady share count decrease over five years, showing careful capital use
• Current and quick ratios near 1.0, indicating sufficient short-term cash availability

While the firm has a reasonable debt level with a debt-to-equity ratio of 0.71, this matches industry standards and seems workable given its cash flow creation. The small drop in current and quick ratios compared to industry averages needs notice but does not currently suggest immediate cash worries that would risk dividend payments.

Growth and Value Situation

Quest Diagnostics displays steady, if not remarkable, growth that backs its dividend plan. Revenue has increased at about 5% per year over recent years, with similar growth projected for the future. Earnings per share have risen at a 6.58% yearly rate, a bit under the dividend growth rate, hinting at some payout ratio increase but from a careful starting level. The value view shows a varied but generally fair situation:

• P/E ratio of 18.56 is better than the industry average of 36.18
• Forward P/E of 17.35 stays under industry peers trading at 37.85
• Both value measures are under S&P 500 averages

For dividend investors mainly centered on income creation, the firm's fair value lowers the chance of value loss that could cancel out dividend gains. The steady growth path suggests the firm can keep increasing dividends along with earnings without overusing its financial means.

Full Fundamental Review

The full fundamental analysis report gives more detail across all review areas, providing dividend investors a complete view of Quest Diagnostics' investment traits. The combined review affirms the firm's advantages in dividend dependability and earnings while noting areas needing watch in financial condition. This complete method fits with careful dividend investing habits that look past basic yield numbers to learn the core business facts supporting those payments.

For investors looking to find other firms with similar dividend traits, the Best Dividend Stocks screen offers a beginning for more study, systematically using the same process that found Quest Diagnostics as a candidate worth reviewing.

This article gives factual review using public data and is not meant as investment guidance. Investors should do their own research and think about their personal money situation before making investment choices. Dividend payments are not certain and may be lowered or ended by the firm's choice.