3/8/25

FactSet Research Systems is a well-established player in the financial data industry, catering to asset managers, investment banks, and hedge funds with top-tier analytics and research solutions. The company operates on a subscription-based model, ensuring a steady flow of recurring revenue.

For income-focused investors, FactSet presents an interesting opportunity. While it doesn’t offer the highest yield, its commitment to consistent dividend growth and strong financial foundation make it a compelling choice for those prioritizing stability and long-term returns. Let’s dive into what makes this stock stand out for dividend investors.

Key Dividend Metrics

💰 Dividend Yield: 0.94%
📈 5-Year Average Yield: 0.87%
💵 Annual Dividend: $4.16 per share
📆 Next Dividend Payment: March 20, 2025
⚠️ Ex-Dividend Date: February 28, 2025
🔄 Payout Ratio: 29.37%
📊 Dividend Growth Rate (5-Year Avg.): Strong and consistent
💪 Dividend Safety: Well-supported by cash flow

Dividend Overview

FactSet isn’t the kind of stock that income investors flock to for immediate high yields. Instead, it appeals to those who appreciate steady, sustainable dividend growth backed by a resilient business model. With a yield just shy of 1%, the real value lies in its ability to increase payouts over time.

A key highlight is the company’s long-standing track record of raising dividends. The current payout ratio of 29.37% signals that FactSet retains a significant portion of its earnings for reinvestment, ensuring both future business expansion and room for further dividend hikes.

This balance between rewarding shareholders and strengthening the business makes FactSet a classic dividend growth stock, where the focus is more on long-term appreciation rather than high upfront yields.

Dividend Growth and Safety

Dividend safety is often overlooked until economic conditions turn volatile, but FactSet has built its payouts on a foundation of solid cash flow. Over the past year, the company generated $631.57 million in operating cash flow, with levered free cash flow sitting at $484.59 million.

This cash flow strength means FactSet can comfortably cover its dividends while still reinvesting in growth initiatives. A subscription-based revenue model with high customer retention adds to its financial predictability, making dividend cuts highly unlikely.

With a history of annual dividend increases, FactSet fits well into a dividend growth strategy. Investors looking for reliable, inflation-beating income growth will likely appreciate this stock, even if its current yield isn’t the highest in the market.

Chart Analysis

Price Action and Moving Averages

The stock price of FactSet Research Systems (FDS) has experienced a mix of trends over the past year, with a noticeable shift in momentum. Initially, the stock was in a downtrend, trading below both the 50-day and 200-day moving averages. However, in the latter half of the year, it staged a strong recovery, breaking above these key moving averages and sustaining an uptrend for several months.

Recently, the stock appears to be losing momentum, as the 50-day moving average (light blue) has started sloping downward. This is a sign that short-term weakness is creeping into the stock price. Additionally, the price has now dropped below the 50-day moving average and is approaching the 200-day moving average (dark blue). If it falls below the 200-day moving average, it could signal a more extended pullback or a shift in trend.

Volume and Market Participation

Volume provides further insight into market sentiment. There were several large spikes in volume, particularly around key price movements. Notably, higher volume accompanied the breakout above the 200-day moving average, suggesting strong buying interest. More recently, however, volume has been moderate but not overwhelmingly strong, indicating a lack of conviction in the most recent price movements.

If selling pressure increases with a corresponding surge in volume, it could confirm that the stock is entering a correction phase. Conversely, if volume remains low while the stock declines, it may indicate that sellers are not aggressive, and the price could stabilize.

Relative Strength Index (RSI) and Momentum

The RSI, a key momentum indicator, has been gradually declining, showing a loss of bullish momentum. It is not yet in oversold territory, but it is trending lower, which suggests that the buying enthusiasm seen in previous months has faded.

A declining RSI without a corresponding price rebound often signals that sellers have control in the short term. If the RSI dips closer to 30, it could indicate that the stock is oversold and may be due for a bounce. However, if it remains weak without a rebound, further downside could be likely.

Support and Resistance Levels

Key support sits around the $440 level, which is close to the current price. This aligns with both the 200-day moving average and previous consolidation zones. If the stock holds above this level, it may find stability. However, if it breaks below, the next significant support is near the $425 to $430 range, an area where the stock found buying interest earlier in the year.

On the upside, resistance is likely around $465, where the 50-day moving average is trending downward. A break above this level would signal renewed bullish momentum, while rejection at this point would reinforce the current weakness.

Analyst Ratings

📈 Recent Upgrades

🔼 BMO Capital raised its price target from 471 to 521, reflecting increased confidence in FactSet’s growth outlook. Analysts cited strong recurring revenue, improved cost management, and continued demand for financial analytics tools as key reasons for the upward revision.

🔼 UBS also adjusted its price target from 485 to 525, signaling optimism around the company’s ability to expand margins and capitalize on growing demand for real-time financial data. Their revised forecast suggests FactSet is well-positioned to benefit from industry-wide digital transformation in asset management and investment research.

📉 Recent Downgrades

🔽 Redburn Atlantic shifted its rating from hold to strong sell and lowered the price target from 420 to 380. Concerns over valuation and increasing competition from larger financial data providers were the primary reasons for the downgrade. Analysts believe the stock may be trading at a premium, making it less attractive at current levels.

🔽 Morgan Stanley maintained a sell rating but adjusted its price target from 373 to 409, slightly improving its outlook. While acknowledging FactSet’s resilient revenue model, analysts pointed out slower earnings growth and potential pricing pressures as factors limiting upside potential.

🎯 Consensus Price Target

📌 The current 12-month consensus price target for FactSet Research Systems stands at 468.81.

🔵 Highest estimate: 536
🔴 Lowest estimate: 390

This consensus suggests a moderate potential upside from current trading levels, with analysts offering a mixed view on FactSet’s valuation and growth prospects. While some see expansion opportunities and operational efficiencies, others remain cautious about competitive risks and earnings momentum. Investors considering the stock may want to weigh these differing perspectives against their own investment strategy and risk tolerance.

Earning Report Summary

FactSet Research Systems recently shared its latest earnings results, and overall, the company continues to show steady growth. Revenue came in at 2.2 billion, marking a 5.6 percent increase from the previous year. That’s now 44 straight years of revenue growth—pretty impressive for a company in the competitive financial data industry.

One of the standout metrics was annual subscription value retention, which stayed strong at 95 percent. This means the vast majority of FactSet’s customers are sticking around, a sign that its services are delivering real value to clients.

When it comes to profitability, earnings per share looked solid. Adjusted diluted earnings per share rose by 12.3 percent to 16.45, showing the company’s ability to grow earnings while keeping costs in check. Meanwhile, the adjusted operating margin was 37.8 percent, reflecting FactSet’s efficient business model and pricing power.

Cash flow remained healthy, though there was a slight dip. Net cash from operating activities for the quarter was 163.2 million, and free cash flow came in at 137.2 million—a bit lower than last year due to higher capital expenditures. However, the company is still generating plenty of cash to reinvest in growth and return value to shareholders.

A bright spot in the report was FactSet’s lower tax burden. The effective tax rate dropped to 23.6 percent, compared to last year’s 39.3 percent. This lower tax rate helped boost net income, making it a positive development for investors.

Looking at the bigger picture, FactSet continues to expand its reach. The company now serves over 8,000 clients worldwide and has more than 216,000 users relying on its platform. It’s also growing its team, with over 12,000 employees across 37 offices in 20 countries. That global presence gives FactSet a strong competitive edge as financial markets become increasingly interconnected.

Overall, the latest earnings report reinforces FactSet’s position as a stable, cash-generating business. The company’s ability to retain customers, grow revenue consistently, and improve profitability makes it a strong player in the financial data industry.

Financial Health and Stability

FactSet’s financials reflect a well-managed company, but there are a few areas to keep an eye on.

• Total Cash: $358.79 million
• Total Debt: $1.55 billion
• Debt-to-Equity Ratio: 77.93%

While debt levels are higher than some might prefer, they remain manageable given the company’s profitability and strong cash flow. Return on equity (ROE) at 29.17% suggests that management is deploying capital efficiently, generating strong returns for shareholders.

Liquidity is another key strength. A current ratio of 1.39 indicates that FactSet has enough assets to meet short-term obligations without financial strain.

Profitability metrics further reinforce the company’s strong standing:

• Profit Margin: 24.16%
• Operating Margin: 34.25%

These figures highlight a business with solid pricing power and an ability to maintain strong margins in a competitive industry.

Valuation and Stock Performance

FactSet is currently trading at $440.73 per share, with a 52-week range between $391.84 and $499.87. Over the past year, the stock has underperformed the broader market, but its long-term trajectory remains positive.

Looking at valuation metrics, FactSet appears expensive relative to earnings:

• Trailing P/E: 31.57
• Forward P/E: 25.71
• Price-to-Sales Ratio: 7.63
• Price-to-Book Ratio: 8.42

Compared to historical averages and industry peers, FactSet is trading at a premium. However, that premium is largely justified by its strong growth profile, high margins, and a predictable business model.

One aspect worth noting is the stock’s lower volatility compared to the overall market. With a beta of 0.76, FactSet tends to move less aggressively than broader indices, making it a potentially attractive option for conservative investors.

Risks and Considerations

Even the best dividend stocks come with risks, and FactSet is no exception.

1️⃣ Premium Valuation – The stock is priced for perfection. If earnings growth slows, the market may adjust expectations, leading to a price correction.

2️⃣ Competitive Landscape – The financial data industry is highly competitive, with firms like Bloomberg and S&P Global vying for market share. If FactSet fails to innovate, customer retention could suffer.

3️⃣ Rising Costs – Increasing labor and technology expenses could pressure profit margins. The ability to pass costs onto customers will be critical in maintaining profitability.

4️⃣ Interest Rate Sensitivity – In a high-rate environment, expensive stocks often see downward pressure. While FactSet’s business model is resilient, valuation multiples could contract.

Despite these risks, none pose a direct threat to the company’s dividend payouts, given the financial stability and cash flow strength supporting them.

Final Thoughts

FactSet is a high-quality dividend growth stock rather than a high-yield play. For investors seeking reliable dividend increases, strong cash flow, and a resilient business model, this stock checks the right boxes.

Its subscription-driven revenue provides stability, while its low payout ratio leaves plenty of room for future dividend growth. While the stock’s valuation is on the high side, investors with a long-term horizon may appreciate its ability to deliver consistent, inflation-beating dividend increases.

For those focused on building long-term wealth through dividend growth, FactSet remains a strong contender in the financial services space.