SS&C Technologies Holdings (NASDAQ:SSNC) Could Be A Buy For Its Upcoming Dividend

SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) stock is about to trade ex-dividend in three 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase SS&C Technologies Holdings' shares on or after the 31st of August will not receive the dividend, which will be paid on the 15th of September.

The company's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.64 per share. Calculating the last year's worth of payments shows that SS&C Technologies Holdings has a trailing yield of 0.8% on the current share price of $75.94. 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. So we need to investigate whether SS&C Technologies Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for SS&C Technologies Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SS&C Technologies Holdings paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether SS&C Technologies Holdings generated enough free cash flow to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.

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.

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

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. That's why it's comforting to see SS&C Technologies Holdings's earnings have been skyrocketing, up 64% per annum for the past five years. SS&C Technologies Holdings looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SS&C Technologies Holdings has delivered an average of 14% per year annual increase in its dividend, based on the past seven years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has SS&C Technologies Holdings got what it takes to maintain its dividend payments? We love that SS&C Technologies Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about SS&C Technologies Holdings, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for SS&C Technologies Holdings that we recommend you consider before investing in the business.

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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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.
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