It looks like SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 30th of August to receive the dividend, which will be paid on the 17th of September.
SS&C Technologies Holdings's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Last year's total dividend payments show that SS&C Technologies Holdings has a trailing yield of 0.9% on the current share price of $45.07. If you buy this business for its dividend, you should have an idea of whether SS&C Technologies Holdings's dividend is reliable and sustainable. As a result, readers should always check whether SS&C Technologies Holdings has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. SS&C Technologies Holdings paid out a comfortable 28% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see SS&C Technologies Holdings's earnings per share have risen 12% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 5 years ago, SS&C Technologies Holdings has lifted its dividend by approximately 9.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is SS&C Technologies Holdings worth buying for its dividend? SS&C Technologies Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. SS&C Technologies Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of SS&C Technologies Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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 email@example.com. 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.