For investors looking for a dependable source of passive income, dividend investing stays a key method. The difficulty is not in locating companies that pay dividends, but in spotting those with the financial durability and commitment to maintain and possibly raise those payments over time. A systematic process involves filtering for stocks that perform well not only in dividend measures, but also in core earnings and financial soundness. This confirms the dividend is not a temporary feature based on a low stock price, but a lasting return backed by a strong business. One company that appears from such a strict filter is MAXIMUS INC (NYSE:MMS), a government services provider that makes a strong argument for dividend-oriented portfolios.
A Dividend Profile Built on Consistency
The main appeal for income investors is, naturally, the dividend itself. MAXIMUS provides a dividend yield of 1.41%, which, while not high, must be judged in context. This yield exceeds the average of its IT Services industry competitors and is supported by a record that dividend investors value: the company has paid and, importantly, has not reduced its dividend for at least ten years. This history of dependability is a major sign of management’s dedication to giving capital back to shareholders.
Beyond the yield and history, the durability of the payment is critical. This is where MAXIMUS stands out. The company’s payout ratio is at a very low 21.54%, meaning it uses less than a quarter of its earnings to pay the dividend. This small ratio offers a wide buffer, letting the company put money back into the business, handle economic slowdowns, and keep dividend payments without difficulty. Also, the dividend has increased at a steady, though gradual, yearly rate of 1.30% over the last five years. Significantly, this increase is backed by higher earnings growth, showing the raises are justified and not threatening financial soundness.
The Foundation: Profitability and Financial Health
A lasting dividend cannot exist without a profitable company and a firm balance sheet. These are the tests that separate strong dividend payers from uncertain ones. MAXIMUS receives a 7 out of 10 on the ChartMill Profitability Rating, showing a fundamentally healthy business model.
- Strong Returns: The company shows efficient use of capital with a Return on Equity of 19.06% and a Return on Invested Capital of 11.77%, both numbers putting it in the high group of its industry.
- Healthy Margins: Its Operating Margin of 9.73% is also better than the industry average, and this margin has shown good movement in recent years, pointing to better operational performance.
On the financial health side, MAXIMUS gets a rating of 5. While this shows there are points to watch, like a recent rise in its debt-to-assets ratio, the overall view stays steady. Key solvency measures are positive:
- An Altman-Z score of 3.34 points to a low short-term chance of financial trouble.
- The Debt-to-Equity ratio of 0.77 matches industry standards.
- Liquidity is sufficient, with Current and Quick Ratios of 1.64, showing the company can easily meet its immediate debts.
This mix of acceptable health and good profitability gives the necessary base that backs the company’s dependable dividend practice.
Attractive Valuation for the Long Term
For the value-aware dividend investor, the purchase price is important. MAXIMUS seems attractively valued, receiving a high ChartMill Valuation Rating of 9. The stock sells at a Price-to-Earnings ratio of 10.24 and a forward P/E of 8.92, which is low not only compared to the wider S&P 500 but also against most of its industry competitors. This price, combined with projected earnings growth of over 16% each year, implies investors are buying a growing, profitable business with a dependable dividend at a fair cost.
A Candidate for Further Research
MAXIMUS INC shows the kind of stock a strict dividend filter tries to find: a company with a dependable and durable payment, supported by good profitability and sufficient financial health, all offered at a reasonable price. Its ten-year record of steady dividends and a low payout ratio give income-focused investors a mix of yield and security. The full ChartMill Fundamental Analysis report for MMS gives a more detailed look into all these numbers.
For investors aiming to create or add to a collection of income-producing stocks, MAXIMUS acts as a notable example of what a fundamental filtering process can find. It highlights the need to look past a high yield alone to judge the quality and durability of the dividend. You can review the full list of stocks that pass this "Best Dividend" filter by visiting the configured screener here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the potential loss of principal. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
