A dividend safety score rates how well a company's dividend is protected from a cut. Our free Dividend Safety Score grades any dividend payer from 0 to 5 using five numbers from its financial statements: two payout checks, balance-sheet strength, business quality and its raise record, with the formula adjusted for REITs, banks, insurers, utilities and MLPs.
Free. Your first score works without an account. After that, a free account keeps it going, with no credit card.
What the score means
The score runs from 0 to 5, and each range carries the same label you see in the tool.
| Score | Label | What it signals |
|---|---|---|
| 4.0 to 5.0 | Safe | Comfortably covered, low leverage, reliable record. |
| 3.0 to 4.0 | Healthy | Solid, with a minor watch item or two. |
| 2.0 to 3.0 | Borderline | Payout or coverage is getting tight. Monitor closely. |
| 1.0 to 2.0 | At Risk | Coverage is strained; a cut is plausible in a downturn. |
| 0 to 1.0 | Unsafe | The dividend is likely unsustainable as it stands. |
Around the number, the result shows the yield against its 5-year average, sector and the S&P 500, the raise streak, dividend history, a payout ratio chart and flags such as "Covered by cash". A "How is this scored?" panel lists every input, its sub-score and the curve behind it.
How the score is calculated
The score is rule-based: the same financial data always produces the same number. It works in four steps.
- Pick the right model. The tool reads the company's sector and industry from Fiscal.ai and chooses one of six versions: Standard, REIT, Bank, Insurance, Utility or MLP. You can view the others in the scoring panel.
- Score five inputs from 0 to 100. Each input is placed on a fixed step curve.
- Weight them. In every model the five inputs carry 35%, 15%, 20%, 10% and 20%. The weighted average is divided by 20 to give the 0 to 5 score. If an input can't be computed from the data, it is left out and the other weights are spread over what remains.
- Apply the cut rule. A dividend cut in the last two fiscal years caps the score at 2.5, however clean the current numbers look.
The Standard model
| Input | Weight | Full marks | Scores zero |
|---|---|---|---|
| Free cash flow payout | 35% | Under 40% | Over 100% |
| Earnings payout | 15% | Under 30% | Over 100% |
| Interest coverage (EBIT ÷ interest) | 20% | Above 15x | Below 2x |
| Return on invested capital | 10% | Above 15% | Below 3% |
| Dividend growth streak | 20% | 25+ years of raises | A cut in the last 5 years |
Between those ends the curves step down in bands. Free cash flow payout, for example, scores 100 under 40%, 80 from 40% to 60%, 60 from 60% to 75%, 40 from 75% to 90%, 20 from 90% to 100%, and 0 above 100%.
Both payout ratios are the median of each year's own ratio over the last five years, so one odd year can't swing the result. Coverage and return on capital use the latest year. Background: our guides to the payout ratio, free cash flow and interest coverage.
The streak counts consecutive years of raises above 0.5%. It scores 20 at 2 years, 33 at 5, 60 at 10, 73 at 15 and 100 at 25, with points in between filled in proportionally. A flat year pauses the streak; two or more flat years reduce its credit. A cut, meaning dividend per share fell more than 2% and total dividends paid fell too, zeroes this input for five years. A young payer that has never cut, with under 15 years of data, gets a floor of 50.
Sector versions
Free cash flow and ordinary payout ratios break down for some businesses, so these models swap inputs and recalibrate curves.
| Model | What changes |
|---|---|
| REIT | FFO payout replaces free cash flow payout, with full marks under 70%. FFO is approximated as net income plus depreciation. Interest coverage uses EBITDA (full marks above 4x), and fixed-asset turnover replaces return on capital. |
| Bank | Earnings payout leads (full marks under 40%). Profitable years out of the last ten replaces the second payout. Equity ÷ assets stands in for the capital cushion (full marks above 10%), and return on equity measures quality. |
| Insurance | Earnings payout leads, ten-year earnings consistency guards against catastrophe years, debt to equity replaces coverage (full marks under 0.3x), and return on equity measures quality. |
| Utility | Earnings payout on a higher curve (full marks under 60%), operating cash flow payout as the second check, net debt to EBITDA at 20% (full marks under 4x), and interest coverage at 10%. |
| MLP | Distribution coverage leads: operating cash flow ÷ distributions, full marks above 1.5x. Free cash flow payout is the stricter check, and net debt to EBITDA carries 20%. |
All inputs come from Fiscal.ai annual financial statements and ratios. No quarterly figures or analyst forecasts.
How to use it well, and what it can't tell you
- Open the scoring panel. A 3.2 built on a long streak and a stretched payout is a different risk from a 3.2 built on low payouts and a short record.
- Check the detected model. If a company looks misclassified, switch models and compare.
- Treat it as a starting point. It reads reported annual figures. It can't see a looming debt maturity, a lost contract or a board that has already decided to cut.
- Mind the approximations. REIT FFO is estimated rather than the company-reported figure, and bank capital uses equity ÷ assets rather than regulatory capital ratios.
- Pair it with the business phase. A payout from a shrinking business deserves more suspicion. Phase Check answers that question.
Examples of reading a result
These are illustrations of common patterns, not live results for any stock.
High score, modest yield. A consumer staples company scores 4.4. Free cash flow payout sits near 60%, coverage is above 15x and it has raised for 30 years. The only points lost are on payout. Safe usually looks like this: room to spare.
Borderline with a strong record. An industrial scores 2.8 despite a 20-year streak. The panel shows free cash flow payout above 90% for most of the last five years. The streak holds the score up while coverage drags it down.
Capped after a cut. A telecom company cut its dividend last year and now shows clean payout ratios. The score is capped at 2.5 and the streak input reads zero. The reset payout may be safer, but it has to rebuild a record first.
Related guides
Where Stock Simplifier fits
The Dividend Safety Score is part of Stock Simplifier's free plan. The full app goes further on one company: it walks you through the business model, moat, management, growth, risks and valuation with Fiscal.ai data, and you score each part to reach your own conclusion. If a dividend check is all you need, the free tool is enough.
Frequently asked questions
A single number for how well a company can keep paying its dividend. Ours runs from 0 to 5 and combines two payout checks, a balance-sheet measure, a quality measure and the raise streak.
Yes. Your first score works without an account. After that you need a free Stock Simplifier account, which requires no credit card. The tool is included in the free plan.
4.0 or higher is labeled Safe and 3.0 to 4.0 is Healthy. Borderline runs from 2.0 to 3.0. Under 2.0 is At Risk or Unsafe.
No. The score is built from reported annual financials, so it reflects the past and present, not decisions management has yet to announce. It spots stretched payouts and heavy debt, but it cannot predict a strategy change or a sudden drop in demand.
REITs get their own model. Payout is measured against funds from operations, approximated as net income plus depreciation, with full marks under 70%. Operating cash flow payout is the second check, interest coverage uses EBITDA, and fixed-asset turnover replaces return on invested capital.
Two rules. A cut in the last two fiscal years caps the whole score at 2.5, and a cut in the last five years sets the streak input to zero.
Fiscal.ai annual financial statements, ratios and prices. Because the inputs are annual, the score mainly moves when a new fiscal year is reported.
No. If the company pays no dividend, the tool tells you there is nothing to score. If a payer's data is incomplete, it says so rather than guessing.