“Quest Diagnostics (DGX) is the world’s leading provider of diagnostic testing, information and services, ranging from routine blood tests to complex, gene-based and molecular testing. The firm has special expertise in the cancer, cardiovascular disease, infectious disease and neurology areas. The company serves half of the physicians and hospitals in the U.S.
“While health-care-related stocks have had their ups and downs, Quest represents a consistent play in the group. The firm has beaten analysts’ earnings estimates in each of the last three quarters, including the first quarter of 2012, in which per-share profits surpassed the consensus estimate by $0.06. Per-share profits should rise at least 3% this year with growth accelerating in 2013 to 10%. Quest demonstrated confidence in its future by boosting its dividend 70% to a quarterly rate of $0.17 per share. Even at the higher dividend rate the company’s payout ratio (the percentage of profits paid out in dividends) is just 15%, leaving plenty of room for future dividend hikes.
“Quest Diagnostics, yielding 1.2%, scores well in our Quadrix stock-rating system, with an Overall score of 76 (out of 100). I like these shares and would feel comfortable buying them at their current price, which represents a nearly 10% discount to the 52-week high of $62.32.”
- Charles B. Carlson, CFA, DRIP Investor, June 2012