FactSet Research Systems (NYSE:FDS) Could Be A Buy For Its Upcoming Dividend

FactSet Research Systems Inc. (NYSE:FDS) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, FactSet Research Systems investors that purchase the stock on or after the 29th of November will not receive the dividend, which will be paid on the 19th of December.

The company's next dividend payment will be US$1.04 per share, on the back of last year when the company paid a total of US$4.16 to shareholders. 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 US$487.62. If you buy this business for its dividend, you should have an idea of whether FactSet Research Systems's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out 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. Fortunately FactSet Research Systems's payout ratio is modest, at just 29% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see FactSet Research Systems earnings per share are up 8.9% per annum over the last five years.

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, 10 years ago, FactSet Research Systems has lifted its dividend by approximately 12% 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.

Final Takeaway

Is FactSet Research Systems worth buying for its dividend? FactSet Research Systems has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, FactSet Research Systems looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while FactSet Research Systems has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for FactSet Research Systems you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.