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Each year, we individually review each of the Dividend Aristocrats, a group of 69 stocks in the S&P 500 Index that has raised their dividends for at least 25 consecutive years.To make it on the list of Dividend Aristocrats, a company must possess a profitable business model with a valuable brand, global competitive advantages, and the ability to withstand recessions.This is why Dividend Aristocrats can continue raising dividends in difficult years.FactSet Research Systems (FDS) is among the new additions to the Dividend Aristocrats list for 2025.This article will examine FactSet’s business model, growth prospects, and whether we are currently rating the stock as a buy, sell, or hold.

Business Overview
FactSet Research Systems, a financial data and analytics firm founded in 1978, provides integrated financial information and analytical tools to the investment community in the Americas, Europe, the Middle East, Africa, and Asia-Pacific.The company provides insight and information through research, analytics, trading workflow solutions, content and technology solutions, and wealth management.Source: Investor Presentation
On December 19th, 2024, FactSet Research Systems announced Q1 2025 results, reporting non-GAAP EPS of $4.37 for the period, beating market consensus by $0.09 while revenue rose 4.9% to $568.7 million.FactSet Research Systems kicked off fiscal 2025 with solid growth in Q1, reporting GAAP revenues of $568.7 million, a 4.9% year-over-year increase.The revenue boost was driven by strong performance across its wealth management, asset owner, and institutional client segments.Organic Annual Subscription Value (ASV), a key performance metric, rose 4.5% to $2,258.8 million, reflecting sustained demand for FactSet’s financial data and analytics solutions.However, the company faced margin pressures, with its GAAP operating margin slipping 120 basis points to 33.6%, due to increased amortization expenses and professional fees.Earnings per share offered a mixed picture. GAAP diluted EPS edged up 1.3% to $3.89, while adjusted diluted EPS rose 6.1%, supported by revenue growth and lower employee compensation costs.FactSet reaffirmed its fiscal 2025 guidance, including projected GAAP revenues of $2.29–$2.31 billion and adjusted diluted EPS in the range of $16.80–$17.40.

Growth Prospects
FactSet has grown its earnings-per-share by an average compound growth rate of 10.3% over the last 10 years. The company’s investments and improved product offerings could lead to significant margin expansion in the following years.Source: Investor PresentationWe have increased our EPS estimate for 2025 to $17.10, matching the midpoint of the management’s guidance, but we have maintained our 8.5% annual earnings growth forecast for the next five years, leading to an estimated earnings-per-share of $25.71 by 2030.Increased earnings arising from expanding margins could be a primary dividend growth driver in the following years. We also believe that the company’s continued investments in its digital platforms will continue to drive user growth in the coming years.FactSet has increased its dividend for 25 consecutive years.Lastly, share buybacks should boost future EPS growth. During Q1, FactSet repurchased 104,475 shares of its common stock for $48.8 million at an average price of $467.00 per share, leaving $251.2 million available under its current buyback program.

Competitive Advantages & Recession Performance
FactSet faces competition from Axioma, MSCI, Aladdin, S&P Capital IQ, Refinitiv, and Bloomberg.The company’s proprietary data offerings differentiate the company in the marketplace, but alternative solutions by the other providers will dilute this competitive advantage over time.The high switching costs tied to changing providers provide the company with some protection and visibility over its cash flow because of its subscription-based offerings.FactSet’s earnings-per-share during the Great Recession are below:

During the past five years, the company’s dividend payout ratio has averaged around 64%. The company has a projected 2024 payout ratio of 63%, which indicates a sustainable dividend.Given the expected earnings growth, there is still room for the dividend to continue to grow at the same pace and extend the track record of consecutive dividend increases which is an important factor for dividend growth investors.

Valuation & Expected Returns
Based on expected 2024 earnings-per-share of $17.10, FDS shares are currently trading for a P/E ratio of 27.4.FactSet has traded with a relatively high valuation multiple in the last decade. The stock’s 10-year average P/E ratio is around 30.7, and the five-year average is 35.0. We are using a P/E target of 28.0 as our fair value target by 2030.Therefore, the stock appears slightly undervalued right now. An expanding P/E multiple from 27.4 to 28 would boost shareholder returns by 0.4% per year over the next five years.Next, shares are currently yielding 0.9%. We also estimate 8.5% annual EPS growth.Putting it all together, total returns are expected at 9.8% per year. With annual returns estimated to reach ~10% per year, we rate the stock a buy.

Final Thoughts
FactSet offers a safe, consistent, and steady long-term dividend growth record.We forecast nearly 10% annualized total returns for the medium-term, derived from the forecasted earnings-per-share growth of 8.5%, the 0.9% dividend yield, and a small valuation tailwind. Therefore, we maintain our buy rating for the stock.More By This Author:Dividend Aristocrats In Focus: Eversource Energy
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