MAXIMUS INC (NYSE:MMS): A Reliable Dividend Stock with Steady Growth and Strong Fundamentals

When assessing dividend stocks, investors typically seek firms that provide appealing yields along with stable payout ratios, steady dividend growth, and solid financial foundations. The "Best Dividend Stocks" tool on ChartMill selects securities with a high ChartMill Dividend Rating (≥7), confirming they adhere to strict dividend sustainability standards, while also demanding a minimum Profitability Rating (≥5) and Health Rating (≥5) to exclude companies with poor earnings or balance sheet concerns. This method aids in finding stocks likely to sustain and increase their dividends in the long run.

A stock that fits these requirements is MAXIMUS INC (NYSE:MMS), a company specializing in government health and human services programs. Here, we explore why MMS is notable for dividend investors based on its financial attributes.

Dividend Strength: Stable Payouts and Consistent Growth

MAXIMUS INC holds a Dividend Rating of 7/10, indicating its capacity to provide reliable and sustainable dividends. Key points include:

• Moderate Yield with Potential for Increase: MMS provides a 1.42% dividend yield, somewhat lower than the S&P 500 average (2.36%) but strong within its sector (surpassing 84% of competitors). Though the yield isn’t the highest, the company makes up for it with dependability.
• History of Reliability: MMS has distributed dividends for at least 10 years without cuts, reflecting its dedication to shareholder returns.
• Low Payout Ratio: The company allocates 23.75% of its income to dividends, far below risky levels (>80%). This cautious strategy allows for reinvestment or resilience during economic challenges.
• Gradual but Steady Growth: Dividends have increased at an annual rate of 3.84%, backed by earnings growth, indicating the raises are grounded in performance rather than short-term tactics.

Profitability and Financial Stability: Backing the Dividend

A dependable dividend depends on a profitable and sound business. MMS scores 6/10 for Profitability and 5/10 for Health, showing no significant concerns:

• Strong Performance: The firm’s Return on Equity (17.99%) and Return on Invested Capital (10.81%) exceed most competitors, highlighting effective use of capital.
• Controlled Debt: While MMS has a Debt/Equity ratio of 0.87 (higher than 63% of industry peers), its Altman-Z score of 3.34 implies minimal bankruptcy risk. The debt-to-free-cash-flow ratio of 6.82 years is somewhat high but matches sector averages.
• Healthy Cash Flow: MMS has produced positive operating cash flow for five straight years, guaranteeing it can fund dividends without heavy borrowing.

Valuation and Growth: A Fair Opportunity

MMS trades at a P/E ratio of 14.07, lower than 78% of its industry peers and the S&P 500 (26.82). Its PEG ratio (factoring in growth) also points to undervaluation, with earnings projected to rise at 18.61% yearly in the near term. Revenue growth has been solid (8.19% YoY), though future estimates are more conservative (3.98% annually).

Why This Is Important for Dividend Investors

The screening process focuses on sustainability—steering clear of high-yield stocks with uncertain payouts. MMS aligns with this approach by offering:

1. A moderate yet dependable yield supported by a low payout ratio.
2. Steady dividend growth tied to earnings.
3. No critical financial flaws that could threaten future distributions.

For those looking for a well-rounded dividend stock with growth prospects, MAXIMUS INC is a strong candidate. Its complete fundamental report offers further details on its finances.

Discover Additional Dividend Options

The "Best Dividend Stocks" tool reveals other high-quality dividend payers with solid fundamentals. See the full results here to compare MMS with other screened options.

Disclaimer: This analysis is not investment advice. Always perform your own research or consult a financial advisor before making investment decisions.