Max Healthcare Institute Limited (NSE:MAXHEALTH) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Max Healthcare Institute Limited (NSE:MAXHEALTH) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Max Healthcare Institute's shares before the 23rd of August in order to be eligible for the dividend, which will be paid on the 20th of October.

The company's upcoming dividend is ₹1.50 a share, following on from the last 12 months, when the company distributed a total of ₹1.50 per share to shareholders. Looking at the last 12 months of distributions, Max Healthcare Institute has a trailing yield of approximately 0.2% on its current stock price of ₹885.15. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Max Healthcare Institute has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Max Healthcare Institute

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Max Healthcare Institute has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether Max Healthcare Institute generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Max Healthcare Institute has grown its earnings rapidly, up 50% a year for the past five years. Max Healthcare Institute is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Unfortunately Max Healthcare Institute has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Max Healthcare Institute worth buying for its dividend? Max Healthcare Institute has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Wondering what the future holds for Max Healthcare Institute? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.