Dividend Safety Score Tool

A high dividend yield can be a gift — or a trap. Stocks with unusually high yields are often priced for a cut. The market is telling you it expects the dividend to be reduced or eliminated. The question every income investor must answer before buying is: can this company actually sustain its dividend?

This tool scores dividend safety across four dimensions, giving you a quick composite assessment that separates safe income from ticking time bombs.

Try It: Dividend Safety Score Tool

Enter the payout ratio, free cash flow payout, debt-to-equity ratio, and consecutive years of dividend growth. The tool scores each metric on a 0-10 scale and produces a weighted composite safety score.

The Four Pillars of Dividend Safety

1. Earnings Payout Ratio — What percentage of earnings goes to dividends? Below 50% is comfortable; above 80% leaves no margin for error.
2. FCF Payout Ratio — The cash version. Dividends are paid in cash, not accounting earnings. A company can report profits while burning cash. FCF payout below 60% is healthy.
3. Debt-to-Equity — High debt increases the risk that cash flow gets redirected from dividends to debt service. Companies with D/E above 1.5x face harder choices during downturns.
4. Dividend Growth Streak — Companies with 10+ years of consecutive increases have a cultural commitment to the dividend. Management at Dividend Aristocrats (25+ years) will cut other spending before cutting the dividend.

Red Flags to Watch For

• Payout ratio above 90% with declining earnings — no room for error.
• FCF payout above 100% — the company is borrowing or drawing down reserves to pay dividends.
• Rising debt concurrent with high payouts — the company may be financing dividends with debt.
• Dividend yield suddenly spikes 50%+ relative to history — usually means the stock price fell hard on fundamental deterioration.

Screen for Safe Dividends

• Try the Dividend Screener Preset — filtered for established dividend payers.
• Or screen for dividend-paying stocks with low debt and positive cash flow to find the safest income investments.