Maximus, Inc. (NYSE:MMS) has announced that it will pay a dividend of $0.28 per share on the 31st of May. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Maximus
Maximus' Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, Maximus' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 13.6%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
Maximus Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.18 in 2013, and the most recent fiscal year payment was $1.12. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Maximus' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Maximus' Dividend
Overall, a consistent dividend is a good thing, and we think that Maximus has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Maximus (of which 1 is potentially serious!) you should know about. Is Maximus not quite the opportunity you were looking for? Why not check out 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.
About NYSE:MMS
Undervalued established dividend payer.
