FactSet Research Systems Inc. (NYSE:FDS) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 29th of August to receive the dividend, which will be paid on the 19th of September.
FactSet Research Systems's next dividend payment will be US$0.72 per share, and in the last 12 months, the company paid a total of US$2.88 per share. Looking at the last 12 months of distributions, FactSet Research Systems has a trailing yield of approximately 1.1% on its current stock price of $269.61. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see FactSet Research Systems paying out a modest 31% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, FactSet Research Systems's earnings per share have been growing at 14% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, FactSet Research Systems has increased its dividend at approximately 15% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy FactSet Research Systems for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, FactSet Research Systems appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of FactSet Research Systems? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.