Yahoo Finance Maximus, Inc. (NYSE:MMS) Pays A US$0.28 Dividend In Just Four Days
Maximus, Inc. (NYSE:MMS) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Maximus' shares before the 12th of May to receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.12 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 $80.5. 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! So we need to investigate whether Maximus can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Maximus
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Maximus's payout ratio is modest, at just 40% of profit. A useful secondary check can be to evaluate whether Maximus generated enough free cash flow to afford its dividend. The good news is it paid out just 24% of its free cash flow in the last year.
It's positive to see that Maximus's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Maximus's earnings per share have been shrinking at 2.4% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Maximus has delivered an average of 20% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Final Takeaway
Is Maximus worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Maximus looks okay on this analysis, although it doesn't appear a stand-out opportunity.
In light of that, while Maximus has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Maximus has 3 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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