Benzinga | Dec 18, 2020 10:14AM EST

Evaluating The Safety Of FactSet Research Systems's Dividend

This is your daily dividend safety check. Today, we consider FactSet Research Systems as its earning call is on December 21, 2020 before the bell. Let's look at FactSet Research Systems (NYSE:FDS) to see if its 0.96% dividend yield is safe, judging by its earnings to dividend payout ratio and history of dividend cuts.

FactSet Research Systems's Payout Ratio

Payout ratio is equal to dividends per share divided by earnings per share, and is used as an important measure of dividend affordability. Investors should not be too concerned about FactSet Research Systems's relatively low payout ratio of 26.74%. When a payout ratio is low like this (i.e. below than 75%), it indicates a company has the money needed to cover its dividend. A ratio closer to 100% could suggest that a company is struggling to pay its dividend.

Has FactSet Research Systems Cut Its Dividend in the Recent Past?

In general, past behavior does not predict future behavior, but companies that have a recent history of dividend cuts are more likely to cut them again, as they have less of an incentive to appease income investors than companies with long histories of consistent or rising dividends. FactSet Research Systems has not cut its dividend in the last few years. While this is no guarantee of dividend safety, it does imply that the company's management is reluctant to cut it.

How Safe Is FactSet Research Systems's Dividend Overall?

FactSet Research Systems has failed neither of our dividend safety tests. It has a low payout ratio and no recent case of dividend cut. With all of this in mind, it is quite unlikely that FactSet Research Systems will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.