Covered, flat for three years, and levered on a soft year. Labcorp paid $254 million of dividends from $874 million of free cash flow in fiscal 2025, 29.1%, a pass. But the dividend has stood at $0.72 a quarter since the August 2023 raise from $0.6186, flat for three years, a caution under §3, and leverage is 4.4x on depressed fiscal 2025 EBITDA of $1,303 million, though 2.4x on fiscal 2024 EBITDA. The 0.80% trailing yield is also under 1%, so the card is graded warn.
Key risk: Leverage measured on a soft earnings year plus a flat dividend means the next raise needs an earnings recovery first.
Changes if: The quarterly rate is raised, or leverage falls below 3x on recovered EBITDA.
- ✓Cash-flow cover 29.1% of FY2025 free cash flow, pass (<60%).
- !Leverage 4.4x on FY2025 EBITDA, fail band — a caution, not a fail, while coverage passes; 2.4x on FY2024 EBITDA, so the ratio turns on whether 2025 earnings recover.
- !Growth record Flat 3+ years at $0.72 — caution under §3; no cut, but no raise since August 2023, and no 5-year record.
- !Trap screen Yield 0.80%, under 1% — warn as a growth holding; no cut, payout under 100%.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.