Maximus (NYSE:MMS) Will Pay A Dividend Of $0.28

Maximus, Inc. (NYSE:MMS) will pay a dividend of $0.28 on the 28th of February. This means the dividend yield will be fairly typical at 1.5%.

Check out our latest analysis for Maximus

Maximus' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Maximus was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.9%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Maximus Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. Although it's important to note that Maximus' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Maximus could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Maximus' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Maximus has 3 warning signs (and 1 which is a bit unpleasant) we think 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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