Dividend Safety Scores™
It's no coincidence our Dividend Safety Scores™ have avoided 98% of dividend cuts and excelled during the pandemic — they're where we invest most of our time so you don't have to. They're the core of our service.
Read on to learn how scores are calculated and how they've performed.
Every stone is turned over
Dividend Safety Scores™ predict dividend risk over a full economic cycle by analyzing the most important metrics for dividends, including:
- Payout ratios
- Debt levels and coverage metrics
- Recession performance
- Dividend longevity
- Industry cyclicality
- Free cash flow generation
- Forward-looking analyst estimates
Our analysts take all of this information into account as well as the latest company news, industry developments, and key business model drivers to assign Dividend Safety Scores™ between 0 and 100:
All of the financial data we rely on is delivered to us daily by Standard & Poor's (S&P), one of the world's leading financial data vendors.
Overseen by a former equity analyst
Dividend Safety Scores™ are not some black-box quant metric. Human input is the bedrock for assigning and monitoring our ratings.
Our founder, Brian Bollinger, is a CPA and former equity analyst at a multibillion-dollar investment firm. Brian has spent thousands of hours researching companies and digging into the weeds of financial statements.
In 2015, Brian developed Dividend Safety Scores™ by going through our coverage universe brick-by-brick, studying each industry and business to cement the metrics that matter most. Most of Brian's time is spent monitoring our coverage for material changes in dividend risk.
Quarterly reviews, continuous monitoring
We're notified internally if a company's fundamentals experience a change that could alter its dividend risk profile. We'll then dive in to investigate. We'll review the latest earnings report, skim call transcripts, and scrutinize the firm's business model to determine whether a score change is prudent.
At a minimum, all ratings are reviewed after quarterly earnings. If material news (e.g. a lawsuit) comes out between earnings, we'll initiate a review. Published review dates make it crystal clear how up-to-date a score is.
Backed by a proven track record
Since our scoring system's inception in 2015, we've recorded every dividend cut in our coverage. The result is the industry's only published, realtime track record of dividend safety ratings we're aware of.
In summary, investors who stuck with companies that scored above 60 (our Safe threshold) would have avoided 98% (707 of 721) of the cuts, including General Electric, Tanger Factory Outlets, and Owens & Minor.
To see all 721 dividend cuts, view our complete track record.
Validated during the pandemic
The pandemic threw a curveball as swaths of the economy shut down and the sharpest economic contraction in U.S. history ensued. An astonishing 25% (334 out of 1,313) of companies we rated cut their dividends in 2020.
Once the pandemic hit, we worked quickly to incorporate new information into our ratings. When the dust settled, our Safe and Very Safe buckets had avoided all but 8 (or 97.6%) of the cuts in 2020.
Moreover, our scores demonstrated their long-term predictive value.
Using our pre-pandemic ratings as of January 2020 and ignoring any score changes we made as new information rolled in, 93% of the 334 dividend cuts would have still come from firms that scored below our Safe threshold.
Here's a breakdown of the 334 cuts by score bucket as of January 2020:
For a more thorough analysis, read our full pandemic review.
Interwoven throughout the site
At a glance, you'll be able to identify holdings with heightened dividend risk. Got a new investment idea? Vet the company in seconds by looking up its rating. Need more ideas? Screen our coverage of 1,000 rated companies.
Alerts keep you in the know
If we issue a change to a score in your portfolio, you'll receive an email notification along with our rationale for the change. No surprises or quantitative mumbo-jumbo. Just clear, concise research crafted by real analysts so you'll never feel in the dark.
Paired with in-depth research
More than just a number, ratings are often published alongside rigorous research reports. That way, you can make informed decisions. Many customers find as much value in our research as in our ratings.
We make some of our research available for free on our blog.
Industry nuances are baked in
Our ratings recognize meaningful differences between industries. For example, a utility company enjoys more stable earnings than a steelmaker, so a utility can afford to maintain a higher payout ratio. We also utilize industry-specific metrics, such as AFFO for REITs and DCF for MLPs.
Ready to analyze your income's safety?
Start your free 14-day trial