FactSet Research Systems Inc. (NYSE:FDS) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase FactSet Research Systems' shares before the 28th of February to receive the dividend, which will be paid on the 20th of March.

The company's upcoming dividend is US$1.04 a share, following on from the last 12 months, when the company distributed a total of US$4.16 per share to shareholders. Based on the last year's worth of payments, FactSet Research Systems has a trailing yield of 0.9% on the current stock price of US$461.78. If you buy this business for its dividend, you should have an idea of whether FactSet Research Systems's dividend is reliable and sustainable. As a result, readers should always check whether FactSet Research Systems has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for FactSet Research Systems

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

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?

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. 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 10% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy FactSet Research Systems for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, FactSet Research Systems appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in FactSet Research Systems for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with FactSet Research Systems and understanding them should be part of your investment process.

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.