The DT Safety Score is our proprietary 0-100 rating of how sustainable a dividend looks, shown on every stock page we track. It replaces our old three-tier “Safety Read” with an actual number, so you can compare two stocks at a glance instead of guessing what “Watch” means.
How the score is calculated
The score is built entirely from the payout ratio, dividends per share divided by earnings per share. A lower payout ratio means more cushion before a dividend is at risk.
- Regular companies: score = 100 minus (payout ratio minus 30) times 0.9, capped between 0 and 100. A 37% payout scores in the 90s. A 100%+ payout scores near zero.
- REITs: real estate investment trusts are required to distribute nearly all taxable income, and their GAAP earnings are pulled down by non-cash depreciation that does not reflect actual cash flow. We apply a funds-from-operations adjustment (dividing the raw EPS payout ratio by 3.5) before scoring, so a REIT is not unfairly punished for a structurally high EPS-based payout ratio.
How to read the score
- 80-100, Very Safe: payout ratio comfortably low. Low near-term cut risk from this metric alone.
- 60-79, Safe: payout ratio in a normal, sustainable range for most sectors.
- 40-59, Watch: payout ratio is elevated. Worth checking free cash flow and recent earnings trends before buying.
- 0-39, At Risk: payout ratio is stretched or exceeds 100% of earnings. Elevated cut risk unless the shortfall is temporary (a one-time earnings dip, for example).
What the score does not capture
The DT Safety Score is a single-metric read on payout coverage, refreshed as our data updates. It does not weigh balance sheet debt, business durability, or management guidance the way a full research report would, and it can look harsh on a company with a temporary, one-off earnings dip. Treat it as a fast first check, not the final word: always read the underlying numbers before deciding anything.
Ratings are point-in-time and can change as new data arrives. This is analysis, not a recommendation to buy or sell, and not personalized advice.