U.S. Markets close in 2 hrs 50 mins
  • S&P 500

    4,157.28
    -28.19 (-0.67%)
     
  • Dow 30

    34,013.94
    -186.73 (-0.55%)
     
  • Nasdaq

    13,883.95
    -168.39 (-1.20%)
     
  • Russell 2000

    2,222.75
    -39.92 (-1.76%)
     
  • Crude Oil

    63.35
    +0.22 (+0.35%)
     
  • Gold

    1,771.60
    -8.60 (-0.48%)
     
  • Silver

    25.80
    -0.31 (-1.19%)
     
  • EUR/USD

    1.2042
    +0.0062 (+0.5178%)
     
  • 10-Yr Bond

    1.5890
    +0.0160 (+1.02%)
     
  • Vix

    18.41
    +2.16 (+13.29%)
     
  • GBP/USD

    1.3988
    +0.0148 (+1.0729%)
     
  • USD/JPY

    108.0690
    -0.7140 (-0.6563%)
     
  • BTC-USD

    54,946.82
    -736.92 (-1.32%)
     
  • CMC Crypto 200

    1,236.73
    -62.23 (-4.79%)
     
  • FTSE 100

    7,000.08
    -19.45 (-0.28%)
     
  • Nikkei 225

    29,685.37
    +2.00 (+0.01%)
     

Should You Buy Maximus, Inc. (NYSE:MMS) For Its Upcoming Dividend?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Maximus, Inc. (NYSE:MMS) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 11th of February in order to be eligible for this dividend, which will be paid on the 26th of February.

Maximus's upcoming dividend is US$0.28 a share, following on from the last 12 months, when the company distributed a total of US$1.12 per share to shareholders. Calculating the last year's worth of payments shows that Maximus has a trailing yield of 1.4% on the current share price of $80.36. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Maximus has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Maximus

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Maximus paid out a comfortable 32% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 32% 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.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Maximus earnings per share are up 8.3% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Maximus has increased its dividend at approximately 25% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy Maximus for the upcoming dividend? Earnings per share have been growing moderately, and Maximus is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Maximus is halfway there. There's a lot to like about Maximus, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Maximus is facing. Every company has risks, and we've spotted 1 warning sign for Maximus you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.