Why You Might Be Interested In FactSet Research Systems Inc. (NYSE:FDS) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see FactSet Research Systems Inc. (NYSE:FDS) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 28th of August will not receive this dividend, which will be paid on the 17th of September.

FactSet Research Systems's next dividend payment will be US$0.77 per share, and in the last 12 months, the company paid a total of US$3.08 per share. Looking at the last 12 months of distributions, FactSet Research Systems has a trailing yield of approximately 0.9% on its current stock price of $356.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for FactSet Research Systems

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FactSet Research Systems paid out a comfortable 30% of its profit last year.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see FactSet Research Systems's earnings per share have risen 15% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FactSet Research Systems has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has FactSet Research Systems got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. FactSet Research Systems ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in FactSet Research Systems for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for FactSet Research Systems and you should be aware of it before buying any shares.

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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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