Some of the world’s best investors stick to dividend portfolios. They know that a steady stream of income is a top wealth building strategy. And finding the best deals is vital. So today, we’re going to review another one of the best dividend stocks around. Let’s take a look at FactSet’s dividend history and safety…
Business Overview and Highlights
FactSet (NYSE: FDS) is a $11 billion financial data and software company. The business is based out of Connecticut and it employs 9,600 people. Last year FactSet pulled in $1.4 billion in sales and that works out to $141,000 per employee.
FactSet offers access to data and analytics to analysts, portfolio managers, and investment bankers at global financial institutions. FactSet focuses on technology and client service. The company’s biggest competitors are Bloomberg L.P., Thomson Reuters, and S&P Global.
On May 17, 2019, FactSet’s board of directors approved a 12.5% increase in the regular quarterly cash dividend from $0.64 per share to $0.72. The increased cash dividend will be paid on June 18 to shareholders of record at the close of business on May 31.
The compound annual growth is 12.2% over 10 years… but over the last year, the dividend climbed 13.2%. The increase in dividend growth is a good sign. FactSet might work out as a great income investment. Let’s take a look at the yield…
Current Yield vs. 10-Year Average
FactSet’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital and we’ll look at that soon.
The dividend yield comes in at 0.98% and that’s below the 10-year average of 1.27%. The chart below shows the dividend yield over the last 10 years…
The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean reverting with share price changes.
Improved Dividend Safety Check
Many investors look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So, a payout ratio of 60% would mean that every $1 FactSet earns, it pays investors $0.60.
The payout ratio is a good indicator of dividend safety… but accountants can manipulate net income. They adjust for goodwill and other non-cash items. Free cash flow is a better metric.
Here’s FactSet’s payout ratio based on free cash flow over the last 10 years…
The ratio is fairly steady over the last 10 years and the trend is up. The last year shows a payout ratio of 26.4%. This gives wiggle room for FactSet’s board of directors to raise the dividend.
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FactSet’s steady dividend creates another opportunity for investors… but will it be a stock you can retire on? Here’s insight into Alexander Green’s Single-Stock Retirement Plan.