Dividend metrics explained
The dividend score places a company's payouts using several metrics, among them dividend yield, payout ratio, dividend growth and the consistency of the dividend. The area enters the metrics score only where the company profile in question takes dividends into account and a reliable assessment is possible.
What is the dividend yield?
The dividends of the last twelve months relative to the current share price. It moves with the dividend and with the price alike, so it should not be read on its own. In the score it is ranked among the dividend payers of the peer group.
What is the dividend payout ratio?
The share of earnings a company pays out as dividends. We compute the ratio ourselves from the dividends and net income of the most recent completed fiscal year that ended no more than two years ago and for which both figures are available; above 100 % means the payout exceeds that year’s earnings. In the score we rate how well earnings cover the dividend, on a fixed, falling scale: up to 40 % scores 100 points, 60 % scores 70, 80 % 40, 100 % 20 and 150 % or more 0 points, linearly in between. Where a dividend is paid despite a loss or without any profit, it is not covered: we then show “–” and score the metric at 0 points. The metric stays unrated where figures are missing or contradict each other, where no dividend was paid in that fiscal year, and for REITs, whose earnings after depreciation on their properties are not a suitable basis. Long-term sustainability cannot be derived from this figure alone.
What does dividend growth show?
Average annual change in the dividend over the multi-year period used. Inside the dividend category of the score it is placed against a fixed scale rather than against a peer group. Special dividends can move individual periods where the source data does not reliably separate them from regular ones. A partial first year of payments is not used as the starting year.
What do the years without a dividend cut mean?
How many of the year-on-year comparisons that could be evaluated kept or raised the dividend. “8/9” means eight out of nine did. A year with no dividend at all counts as an interruption. The year of the first payment is compared as well, unless a special payment dominates it; a single payment with no payment in the year before or after does not count as a dividend year. Payments from before the listing do not count unless they continue without a break across it, as with a change of ticker. The score additionally weighs the length of the history and the current unbroken run, so a young payer cannot reach the top value even without a cut.
How the metrics become a score
How a metric is placed within its comparison group, and how the area scores and the metrics score are formed from it, is described in the methodology.