Thank you for your interest in my Dividend Cut Risk (DCR) Calculator.
Before using it, please remember that this tool is not intended as financial advice. Always conduct your own research or consult with a financial advisor before making investment decisions. Past performance does not guarantee future results, and errors or omissions may occur.
Choose your stock for which you want to see the DCR Score:
When you open the DCR Calculator, you will find a search bar and a View Chart button. Simply begin typing the ticker symbol (the calculator only supports NYSE/Nasdaq U.S. stocks) and then click View Chart.
Be aware that if this is the first time you are using the calculator during your session, it may take up to 40 seconds to gather the data for the DCR Score, so please be patient. Below is what appears once the data is fetched:
Here are the 8 metrics I selected:
A bar chart with the 25-year dividend history (when applicable)
The 5-year average payout ratio
The 5-year average debt-to-equity ratio
The 5-year average interest coverage
The 5-year average FCF payout
The 25-year net income growth rate (CAGR) (may be fewer years if earlier data is unavailable)
The 5-year dividend growth rate (CAGR)
The 25-year dividend growth rate (CAGR) (may be fewer years if earlier data is unavailable)
Any past dividend cuts
Computation of the DCR Score:
For each of these criteria, I assign a grade from 1 to 5 (where 1 is the best score and 5 is the worst).
On the top of each metric card, you can click on the info icon
to see the score.
Below is the scoring method for each metric:
5-Year Average Payout Ratio
If the ratio is below 20%, the score is 1. If it is below 40%, the score is 2. If it is below 60%, the score is 3. If it is below 80%, the score is 4. If it’s above 80%, the score is 5.
5-Year Average Debt-to-Equity
If debt-to-equity is below 0, the score is 5. If it is below 0.5, the score is 1. If it is below 1, the score is 2. If it is below 2, the score is 3. If it is below 3, the score is 4. If it’s above 3, the score is 5.
5-Year Average Interest Coverage
If interest coverage is above 10, the score is 1. If it is above 7.5, the score is 2. If it is above 5, the score is 3. If it is above 2.5, the score is 4. If it’s below 3, the score is 5.
5-Year Average FCF Payout
If it is under 20%, the score is 1. If it is under 40%, the score is 2. If it is under 60%, the score is 3. If it is under 80%, the score is 4. If it’s above 80%, the score is 5.
25-Year Net Income Growth Rate (CAGR)
If net income CAGR is above 10%, the score is 1. If it is above 7%, the score is 2. If it is above 4%, the score is 3. If it is above 1%, the score is 4. If it’s below 1%, the score is 5.
5-Year Dividend Growth Rate (CAGR)
If dividend CAGR is above 10%, the score is 1. If it is above 5%, the score is 2. If it is above 0%, the score is 3. If it is above -5%, the score is 4. Otherwise, the score is 5.
25-Year Dividend Growth Rate (CAGR)
If dividend CAGR is above 8%, the score is 1. If it is above 5%, the score is 2. If it is above 2%, the score is 3. If it is above 0%, the score is 4. If it is below 0%, the score is 5.
Past Dividend Cuts
If the stock had a dividend cut in the past, the score is 5. Otherwise, it is 1.
I average these eight scores to get an initial result. If the 5-year dividend growth rate is negative, I add 1 point. If there has been at least one dividend cut in the last 25 years, I add 3 points. I then convert the final value into a percentage, which becomes the Dividend Cut Risk Score (DCR Score).
Interpretation of the DCR Score:
Below are the possible risk levels for the final DCR Score:
0% – 20% (Low Risk): Dividend cuts are extremely unlikely unless there are major, unexpected changes to the business.
21% – 40% (Low/Moderate Risk): Dividend cuts are unlikely in normal economic conditions.
41% – 60% (Moderate Risk): Some risk of dividend cuts in bad economic conditions.
61% – 80% (High Risk): Significant risk of dividend cuts even in normal economic conditions.
Above 80% (Very High Risk): A dividend cut is likely in the near future.
If you are curious about the calculation or want to explore further, feel free to check the Excel file to see exactly how I compute the DCR Score.
If you any questions, you can send an email at [email protected]