Sometimes corporate spinoffs work really well. Other times, they don't. You can put General Electric's (GE 1.44%) spinoff of GE HealthCare Technologies (GEHC -0.21%) in the former category.

General Electric began a new chapter in its long story earlier this month by setting up its healthcare business as a stand-alone entity. In only a few weeks on the market, GE HealthCare stock has soared close to 20%. By comparison, GE stock has fallen around 5% year to date.

But there's one thing the parent has that the child doesn't -- a dividend. Will GE HealthCare pay a dividend anytime soon?

Straight from the horse's mouth

GE HealthCare addressed the question of whether or not it will pay dividends in its S-1 regulatory filing to the U.S. Securities and Exchange Commission (SEC). And the company's answer was ... a definite maybe.

In the SEC filing, GE HealthCare stated that it "will be evaluating whether to pay cash dividends to our stockholders." Unsurprisingly, the company said that the timing and potential amount of any future dividend program will be solely up to its board of directors.

What will it take for GE HealthCare's board members to approve a dividend? They will look at several factors. The company's financial condition stands at the top of the list. GE HealthCare's debt obligations and earnings are especially important considerations. 

Another key criterion is the need to retain funds to invest for future growth. This is the main reason why many companies choose not to initiate dividend programs.

Just because GE HealthCare plans to evaluate paying a dividend, though, doesn't mean that it will actually do so. The company clearly stated in its S-1 filing, "There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends."

Can GE HealthCare afford a dividend?

GE HealthCare expects to report full-year 2022 revenue of around $18.3 billion. It projects organic revenue growth this year of between 5% and 7%. There are plenty of companies that generate lower sales that already pay dividends.

But revenue isn't the main determinant of whether or not GE HealthCare can afford a dividend. Free cash flow is the most important factor. The company must generate ample cash after funding its business operations and needed capital expenditures to even consider initiating a dividend.

Before the spinoff, GE projected that GE HealthCare would generate free cash flow of between $1.8 billion and $2 billion. At the J.P. Morgan Healthcare Conference earlier this month, executives said that GE HealthCare's free cash flow will be near the low end of that range. 

Is $1.8 billion or so in free cash flow enough to support a dividend? Yep. GE HealthCare wouldn't have to use even half of its free cash flow to pay an attractive dividend with a yield in the ballpark of 2.8%. 

A dividend on the way?

If GE HealthCare should be able to afford a dividend, will it do so soon? My best guess is that it won't. I think there are a couple of things that could cause the company to hold off on initiating a dividend program in the near term.

First, GE HealthCare inherited a lot of debt as a result of its spinoff from GE. In the S-1 filing, the company said that its total indebtedness would stand at $10.25 billion. I wouldn't be surprised if GE HealthCare opts to make paying down some of this debt a higher priority than paying a dividend.

Second, GE HealthCare knows that it needs to invest in growth. Just days after its spinoff, the company announced plans to buy French medical device maker Imactis for an undisclosed amount. The board could view additional business development deals and increasing internal research and development spending as better ways to reward shareholders than paying dividends. 

I suspect that GE HealthCare probably will initiate a dividend program at some point in the future. For now, though, investors will probably be better off with the company using its free cash flow for other purposes.