Maximus, Inc. (NYSE:MMS) will pay a dividend of $0.30 on the 28th of February. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Maximus

Maximus' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Maximus was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 1.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Maximus Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.18 in 2015 to the most recent total annual payment of $1.20. This means that it has been growing its distributions at 21% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Maximus Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Maximus has impressed us by growing EPS at 7.5% per year over the past five years. Maximus definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Maximus Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Maximus that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.