Readers hoping to buy FactSet Research Systems Inc. (NYSE:FDS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase FactSet Research Systems' shares before the 31st of August to receive the dividend, which will be paid on the 17th of September.

The company's next dividend payment will be US$1.16 per share, and in the last 12 months, the company paid a total of US$4.64 per share. Calculating the last year's worth of payments shows that FactSet Research Systems has a trailing yield of 1.6% on the current share price of US$296.08. If you buy this business for its dividend, you should have an idea of whether FactSet Research Systems's dividend is reliable and sustainable. So we need to investigate whether FactSet Research Systems can afford its dividend, and if the dividend could grow.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see FactSet Research Systems paying out a modest 29% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see FactSet Research Systems's earnings per share have risen 10% 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 10% 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid FactSet Research Systems? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, FactSet Research Systems appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while FactSet Research Systems looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.