The strategy behind this stock selection starts with a simple but effective principle: the best dividend stocks are not just those with the highest yield on paper. Instead, they combine a reliable dividend with strong underlying business fundamentals—namely, solid profitability and financial health. The 'Best Dividend' screen used here filters for stocks with a high ChartMill Dividend Rating (7 or higher), but it also ensures the company is profitable (Profitability Rating of at least 5) and financially healthy (Health Rating of at least 5). This triple filter helps avoid the common pitfall of chasing yield only to find a company whose dividend is at risk due to weakening earnings or a stretched balance sheet. With a Dividend Rating of 7, a Profitability Rating of 8, and a Health Rating of 7, FactSet Research Systems outperforms all three thresholds, making it a candidate worth a closer look for dividend-focused investors.
Dividend Profile: A History of Reliable Growth
When evaluating a dividend stock, sustainability and growth are often more important than the sheer yield. FactSet pays an annual dividend yield of 1.86%, which is in line with both its industry average and the broader S&P 500. While this yield won’t turn heads on its own, the story behind it is far more interesting.
The company has paid a dividend consistently for at least the last ten years and has not reduced its payout during that time. In fact, the dividend has grown at an annual rate of 7.85%. This steady growth is supported by a very sustainable payout ratio of just 27.82% of earnings. In simple terms, the company retains most of its profit to reinvest in the business while still rewarding shareholders, indicating there is ample room for future increases. Notably, earnings are growing faster than the dividend, which adds an extra layer of security for investors who plan to hold the stock long-term. For dividend investors, this combination of historical reliability, consistent growth, and a low payout ratio is the hallmark of a company that treats its dividend as a priority, not an afterthought.
Profitability: Above Industry Standards
A dividend is only as safe as the profits that fund it. FactSet’s profitability metrics are not just good—they are among the best in the Capital Markets industry. The company records a Return on Equity (ROE) of 27.61% and a Return on Invested Capital (ROIC) of 16.65%, both of which outperform more than 86% of its industry peers. The profit margin stands at a solid 24.48%, placing FactSet in the top third of its sector.
These high returns are not a fluke; they are built on consistent operational performance. The company has maintained positive earnings and cash flow from operations for each of the last five years, and its operating margin has improved over the same period. For the dividend investor, this reinforces the idea that FactSet is not relying on financial engineering to pay its dividend. Strong, repeatable profitability gives the company the flexibility to continue growing its shareholder distributions even if economic conditions soften.
Financial Health: A Strong Balance Sheet
The screen also requires a minimum Health Rating of 5, and FactSet scores a strong 7 here as well. The company’s Altman-Z score of 4.67 suggests it is far from any risk of financial distress. Its debt-to-free-cash-flow ratio stands at a comfortable 2.01, meaning the company could theoretically pay off all its debt with just over two years of free cash flow. The debt-to-equity ratio of 0.64 is considered moderate and below the levels that would raise red flags.
With a current ratio of 1.43 and a quick ratio of 1.43, FactSet maintains adequate liquidity to cover its short-term obligations. Additionally, the company has been actively reducing its share count over both the one-year and five-year periods, a common practice among well-capitalized companies that signals management's confidence in the future.
The financial health criteria of the screening strategy exists precisely to weed out companies that might look cheap but are carrying too much debt or facing solvency risks. FactSet's metrics confirm it belongs in the healthier half of its industry, giving dividend investors peace of mind that the payout is not going to be disrupted by a sudden liquidity crisis.
Valuation: Not Overpaying for Quality
Even the best stock can be a poor investment if bought at the wrong price. At current levels, FactSet trades at a Price/Earnings (P/E) ratio of 14.25, which is well below the S&P 500 average of 27.00 and also slightly below the industry average. The forward P/E of 12.78 confirms this picture. While the PEG ratio suggests that current earnings multiples are not fully justified by near-term growth alone, the company’s superior profitability rating helps compensate for that. In essence, you are getting a company with top-tier profit margins and a reliable, growing dividend at a valuation that is not demanding.
The Enterprise Value to EBITDA ratio also suggests FactSet is cheaper than nearly 80% of its industry peers. For a dividend-focused strategy, buying a quality company at a reasonable valuation is critical—it means the yield on an initial investment is more likely to stick, and any capital appreciation becomes a bonus.
More to Explore
If FactSet fits the profile of what you look for in a dividend stock, you can find more candidates using the same screening methodology. The screen used to identify this stock is fully configurable and includes filters for volume, price, and the three key ChartMill ratings (Health, Profitability, and Dividend). You can run the screen yourself to see the full results, sorted by dividend rating, here: Best Dividend Stocks.
For a deeper look at FactSet's specific numbers, including its full fundamental analysis and historical data, refer to the detailed Fundamental Analysis Report.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a financial advisor before making any investment decisions.
Read full article here »
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FactSet Research Systems (NYSE:FDS) Stands Out as a Top Dividend Stock with Solid Fundamentals
The strategy behind this stock selection starts with a simple but effective principle: the best dividend stocks are not just those with the highest yield on paper. Instead, they combine a reliable dividend with strong underlying business fundamentals—namely, solid profitability and financial health. The 'Best Dividend' screen used here filters for stocks with a high ChartMill Dividend Rating (7 or higher), but it also ensures the company is profitable (Profitability Rating of at least 5) and financially healthy (Health Rating of at least 5). This triple filter helps avoid the common pitfall of chasing yield only to find a company whose dividend is at risk due to weakening earnings or a stretched balance sheet. With a Dividend Rating of 7, a Profitability Rating of 8, and a Health Rating of 7, FactSet Research Systems outperforms all three thresholds, making it a candidate worth a closer look for dividend-focused investors.
Dividend Profile: A History of Reliable Growth
When evaluating a dividend stock, sustainability and growth are often more important than the sheer yield. FactSet pays an annual dividend yield of 1.86%, which is in line with both its industry average and the broader S&P 500. While this yield won’t turn heads on its own, the story behind it is far more interesting.
The company has paid a dividend consistently for at least the last ten years and has not reduced its payout during that time. In fact, the dividend has grown at an annual rate of 7.85%. This steady growth is supported by a very sustainable payout ratio of just 27.82% of earnings. In simple terms, the company retains most of its profit to reinvest in the business while still rewarding shareholders, indicating there is ample room for future increases. Notably, earnings are growing faster than the dividend, which adds an extra layer of security for investors who plan to hold the stock long-term. For dividend investors, this combination of historical reliability, consistent growth, and a low payout ratio is the hallmark of a company that treats its dividend as a priority, not an afterthought.
Profitability: Above Industry Standards
A dividend is only as safe as the profits that fund it. FactSet’s profitability metrics are not just good—they are among the best in the Capital Markets industry. The company records a Return on Equity (ROE) of 27.61% and a Return on Invested Capital (ROIC) of 16.65%, both of which outperform more than 86% of its industry peers. The profit margin stands at a solid 24.48%, placing FactSet in the top third of its sector.
These high returns are not a fluke; they are built on consistent operational performance. The company has maintained positive earnings and cash flow from operations for each of the last five years, and its operating margin has improved over the same period. For the dividend investor, this reinforces the idea that FactSet is not relying on financial engineering to pay its dividend. Strong, repeatable profitability gives the company the flexibility to continue growing its shareholder distributions even if economic conditions soften.
Financial Health: A Strong Balance Sheet
The screen also requires a minimum Health Rating of 5, and FactSet scores a strong 7 here as well. The company’s Altman-Z score of 4.67 suggests it is far from any risk of financial distress. Its debt-to-free-cash-flow ratio stands at a comfortable 2.01, meaning the company could theoretically pay off all its debt with just over two years of free cash flow. The debt-to-equity ratio of 0.64 is considered moderate and below the levels that would raise red flags.
With a current ratio of 1.43 and a quick ratio of 1.43, FactSet maintains adequate liquidity to cover its short-term obligations. Additionally, the company has been actively reducing its share count over both the one-year and five-year periods, a common practice among well-capitalized companies that signals management's confidence in the future.
The financial health criteria of the screening strategy exists precisely to weed out companies that might look cheap but are carrying too much debt or facing solvency risks. FactSet's metrics confirm it belongs in the healthier half of its industry, giving dividend investors peace of mind that the payout is not going to be disrupted by a sudden liquidity crisis.
Valuation: Not Overpaying for Quality
Even the best stock can be a poor investment if bought at the wrong price. At current levels, FactSet trades at a Price/Earnings (P/E) ratio of 14.25, which is well below the S&P 500 average of 27.00 and also slightly below the industry average. The forward P/E of 12.78 confirms this picture. While the PEG ratio suggests that current earnings multiples are not fully justified by near-term growth alone, the company’s superior profitability rating helps compensate for that. In essence, you are getting a company with top-tier profit margins and a reliable, growing dividend at a valuation that is not demanding.
The Enterprise Value to EBITDA ratio also suggests FactSet is cheaper than nearly 80% of its industry peers. For a dividend-focused strategy, buying a quality company at a reasonable valuation is critical—it means the yield on an initial investment is more likely to stick, and any capital appreciation becomes a bonus.
More to Explore
If FactSet fits the profile of what you look for in a dividend stock, you can find more candidates using the same screening methodology. The screen used to identify this stock is fully configurable and includes filters for volume, price, and the three key ChartMill ratings (Health, Profitability, and Dividend). You can run the screen yourself to see the full results, sorted by dividend rating, here: Best Dividend Stocks.
For a deeper look at FactSet's specific numbers, including its full fundamental analysis and historical data, refer to the detailed Fundamental Analysis Report.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a financial advisor before making any investment decisions.
Read full article here »