Yahoo Finance Laboratory Corporation of America Holdings (NYSE:LH) Is Due To Pay A Dividend Of $0.72
The board of Laboratory Corporation of America Holdings (NYSE:LH) has announced that it will pay a dividend on the 12th of June, with investors receiving $0.72 per share. This means that the annual payment will be 1.4% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Laboratory Corporation of America Holdings
Laboratory Corporation of America Holdings Is Paying Out More Than It Is Earning
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Laboratory Corporation of America Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 240%, which is on the unsustainable side.
Laboratory Corporation of America Holdings Is Still Building Its Track Record
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 last annual payment of $2.88 was flat on the annual payment from2 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Laboratory Corporation of America Holdings' EPS has fallen by approximately 12% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Our Thoughts On Laboratory Corporation of America Holdings' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Laboratory Corporation of America Holdings' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 4 warning signs for Laboratory Corporation of America 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
