How we score a dividend.

DividendsCut currently tracks US-listed stocks only — the NYSE, NASDAQ, NYSE American, and OTC markets. That's roughly 8,000+ tickers, including most of the Dividend Aristocrats and Dividend Champions.

Foreign companies aren't tracked directly, but many of them are listed on US exchanges as American Depositary Receipts (ADRs) — a US-traded proxy that represents shares of the underlying foreign stock. ADRs work the same way as native US stocks: they pay dividends, they have ex-dates, you can hold them in any US brokerage account.

Examples:

• Engie (French utility) → ENGIY
• Novo Nordisk (Danish pharma) → NVO
• Alibaba (Chinese tech) → BABA
• Unilever (UK consumer) → UL
• Toyota (Japanese auto) → TM

If you try to add a foreign-listed ticker (like ENGI.PA for Engie on Paris), we won't find it — but the ADR alternative usually exists. A quick web search for "[company name] ADR" will surface the US ticker.

Direct international coverage (London, Paris, Tokyo, etc.) is on the roadmap once we have enough scale to justify the data plan upgrade.

DividendsCut computes a 1–10 safety score for each stock in your watchlist. Higher = safer dividend. The score is a weighted combination of four fundamental dimensions:

• Payout ratio — how much of profits goes out as dividends
• Cash flow coverage — does actual cash flow cover the dividend
• Debt / EBITDA — how leveraged the balance sheet is
• Growth streak — how many consecutive years of increases

The thresholds for each dimension are sector-adjusted — a 70% payout ratio is healthy for a utility but stretched for a tech company. The score recomputes nightly using the latest financial statements.

Weights vary by sector

For most sectors, each of the four dimensions contributes equally (up to 2.5 points each, 10 total). But two financial sub-categories use a different structure:

Banks (like JPMorgan, Goldman Sachs, Bank of America) are scored only on payout ratio and growth streak — up to 5 points each. We don't score them on debt or cash flow, because those numbers don't mean for a bank what they normally mean. A bank's customer deposits get recorded as "debt" on the balance sheet, so a debt ratio looks alarming even for the healthiest bank. And bank cash flow swings with trading activity rather than dividend-paying capacity. The honest answer for banks: we verify they have profits backing the dividend and that they've been raising it consistently.

Other financial services companies — asset managers like BlackRock, payment networks like Visa and Mastercard — sit between banks and industrials. We drop the debt dimension (their capital structure isn't really debt in the traditional sense) but keep cash flow coverage. Weights: payout up to 3 points, coverage up to 3 points, growth up to 4 points.

Our bucket thresholds are tuned per sector and updated regularly based on backtest validation against a curated set of historical dividend cuts and dividend champions. The audit log of every methodology change is maintained internally.

Note: the score is computed deterministically from public financial data. No predictive AI is used to assign the score itself. The AI report writes the plain-English summary you see in your health-check, but it does not influence the score number.

A health-check report is generated for each Pro user 21 days before a stock's next ex-date. It has two parts you should look at first:

• Verdict — either "No action required" (green) or "Double-check needed" (amber).
• Red flags — human-readable explanations of any specific concerns.

When the verdict turns to "Double-check needed"

Any one of these rules can flip a report to "Double-check needed":

1. Safety score ≤ 5
2. At least one high-severity red flag detected (payout, coverage, or debt in the red zone)
3. Score dropped by 3 or more points from the previous reading
4. A dividend event (cut, suspension, elimination) was detected on this stock in the last 90 days
5. Recent earnings missed estimates by more than 10% (EPS) or 5% (revenue)

What "Double-check needed" doesn't mean

It doesn't mean sell. It means: read the underlying data, decide for yourself whether the dividend's safety has changed enough to warrant action. We surface the signal — you make the call.

Dividend

A cash payment from a company to its shareholders. Most US stocks that pay dividends do so quarterly.

Ex-date

The cutoff. You must own the stock before this date to receive the next dividend payment. If you buy on or after the ex-date, the seller gets that payment, not you.

Record date and payment date

The record date is when the company finalizes who owns the stock (usually one business day after the ex-date). The payment date is when the cash lands in your account — typically two to four weeks after the ex-date.

Dividend cut

When a company reduces the dividend amount. Almost always followed by a significant share price drop. This is the event we're built to catch.

Dividend suspension

A temporary pause. Often a precursor to a cut or elimination.

Dividend elimination

When a company stops paying dividends entirely.

Yield

Annual dividend divided by share price. A 3% yield means $3 in annual dividends per $100 invested. We don't score on yield — high yield is often a symptom of declining share price (because the dividend hasn't been cut yet).

Safety score

Our 1–10 composite. Above 7 = generally safe. 5–7 = caution zone. Below 5 = elevated risk. The number is sector-adjusted, so apples-to-apples comparisons are most meaningful within the same sector.

Different industries have different "normal" ranges for payout ratio, leverage, and growth. Applying the same thresholds across all of them would mean every utility and REIT in your portfolio looks like it's in the red zone by default — even when they're perfectly healthy by their own industry standards.

Our score adjusts for that. Here's the rationale for each sector:

Utilities tolerate higher payout and use operating cash flow

Stable, regulated cash flows from electricity and gas customers. Demand barely moves with the economy. They can comfortably pay 70–80% of profits as dividends without strain. Their capital expenditure is financed through regulated debt, which makes free cash flow structurally low — so we score coverage on operating cash flow instead. See Section 03 for the full explanation.

REITs are required to distribute most of their income — and are scored on AFFO

By US tax law (the Real Estate Investment Trust rules), a REIT must distribute at least 90% of its taxable income to shareholders to maintain its REIT tax status. So a 95% payout for a REIT is normal — anything materially lower would actually be unusual. We use an AFFO-equivalent payout numerator (net income plus depreciation and amortization) rather than GAAP net income, which would show inflated payout ratios due to non-cash real estate depreciation. See Section 02 for details.

Tech should pay less than 40% — but mature dividend-payers get different thresholds

Reinvestment-heavy businesses need to keep capex and R&D funded. Tech companies that consistently pay above 60% are often signaling that growth options have run out. That said, a small number of technology companies have been paying and growing dividends for 15+ years and now run payout ratios above 50% — behaving more like industrial dividend payers than growth-stage tech. For those tickers (IBM is the clearest example), we apply a "mature tech" designation and score them against the default industrial thresholds rather than the tighter tech-sector standards.

Banks carry more debt — but debt/EBITDA doesn't apply to them

Both banks and utilities operate on higher leverage as a matter of business model. For utilities, a 3–4× debt/EBITDA is unremarkable. For banks, the ratio is meaningless as a safety indicator — a bank's deposits and borrowings are its working capital, not a sign of excess risk. We score banks on payout and growth streak only, which are the two dimensions that actually reflect dividend safety for financial institutions.

Sector and industry are taken from each stock's profile (via Financial Modeling Prep). When the sector isn't recognized in our table, we fall back to the conservative default thresholds.

The algorithm is a deterioration detector, not a prophet. Most dividend cuts are preceded by months of declining fundamentals — rising payout ratios, shrinking cash flow coverage, accumulating debt. Those patterns show up in financial statements before the cut announcement, and that is what we are built to catch.

But not every cut follows that path. There are three categories of risk that balance-sheet data cannot surface in advance:

External shocks

COVID-19 forced dozens of companies to suspend or cut dividends in spring 2020 — not because their financials were deteriorating beforehand, but because an external event eliminated revenues almost overnight. The same dynamic applies to sudden regulatory action (the Federal Reserve imposed an asset cap on Wells Fargo in 2018 that constrained its ability to grow dividends), oil price crashes that compress energy cash flows faster than any annual statement could predict, or pandemic-scale demand destruction.

These cuts arrive without a financial warning. No balance-sheet metric signals a once-in-a-generation pandemic three quarters before it happens.

Structural corporate events

When a company spins off a major business unit, the parent sometimes cuts its dividend to reflect the smaller cash base — even if the pre-spinoff financials looked healthy. 3M's 2024 Solventum spinoff is the clearest recent example: 3M cut its dividend after spinning off its healthcare business, despite years of strong payout metrics beforehand. The financial signal closest to the event wasn't a deteriorating payout ratio; it was a strategic decision about capital allocation.

Strategic pivots carry the same blind spot. When Intel announced it was pivoting to a foundry model, the dividend cut that followed reflected a management decision, not a deterioration trend visible in trailing fundamentals. Some events leave a financial trail in the months before they happen — others do not.

Forward guidance and narrative signals

We don't read press releases, earnings call transcripts, or analyst notes. If management signals on a quarterly call that they are "evaluating the distribution policy" or "prioritizing debt repayment," that's a meaningful signal — and we won't catch it until the decision flows through to reported financials, which can take one or more quarters.

Analyst downgrades, news of pending litigation, or management turnover can all precede a cut. None of that travels through our data pipeline today.

What this means for you

Use the score as one signal among several, not the only one. For companies in cyclical sectors or undergoing obvious strategic transitions, pair the score with a read of recent earnings commentary. The score tells you what the balance sheet says — you still need to bring context it cannot.