Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is about to go ex-dividend in just 3 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase SS&C Technologies Holdings' shares on or after the 1st of June, you won't be eligible to receive the dividend, when it is paid on the 15th of June.

The company's next dividend payment will be US$0.27 per share, and in the last 12 months, the company paid a total of US$1.08 per share. Calculating the last year's worth of payments shows that SS&C Technologies Holdings has a trailing yield of 1.6% on the current share price of US$65.74. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. SS&C Technologies Holdings paid out a comfortable 32% of its profit last year. A useful secondary check can be to evaluate whether SS&C Technologies Holdings generated enough free cash flow to afford its dividend. Luckily it paid out just 18% of its free cash flow 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.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see SS&C Technologies Holdings earnings per share are up 6.6% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, SS&C Technologies Holdings has increased its dividend at approximately 16% 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

From a dividend perspective, should investors buy or avoid SS&C Technologies Holdings? Earnings per share have been growing moderately, and SS&C Technologies Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but SS&C Technologies Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. 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.

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

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.