The method
How it is worked out
Yield = DPS ÷ price; payout = DPS ÷ EPS; cover = FCF per share ÷ DPS
- FCF
- Operating cash flow minus capital expenditure
Dividend Safety Calculator
Check whether a dividend is covered by earnings and free cash flow, what yield you're really getting, and whether it looks sustainable. The result updates as you type so you can compare scenarios quickly.
Keep in mind
What it leaves out
- One year of dataUse normalised earnings; a single bad year distorts the payout ratio.
- Sector normsUtilities and REITs run high payouts by design.
- BuybacksCompanies returning cash via buybacks show lower yields for the same total return.
Use the calculator to compare scenarios rather than as a guaranteed forecast.
About the Dividend Safety Calculator
Check whether a company's dividend is covered by earnings and free cash flow, what yield you are really being offered, and whether the payout looks sustainable or vulnerable to a cut.
How it works and an example to tryShow less
How to use the result
Yield is dividend per share over price. Payout ratio is dividend over earnings; cover is free cash flow per share over the dividend. A six-point score adds marks for a payout under 60% or 80%, cash cover above 1.3× or 1×, leverage under 2× EBITDA and positive dividend growth.
Example to try
At £42 a £2.10 dividend yields 5%. Earnings of £3.20 give a 66% payout, free cash flow of £2.60 covers it 1.24×, debt is 1.8× EBITDA and growth 4%: four points of six, adequately covered. Hold and watch cash flow.
Put it to work
Try it on a real situation
Load an example
What moves the result most
Worked out from your figures above. Tap a row to try it.
Who uses it, and when
Income investors, retirees screening dividend shares and anyone tempted by a high yield.
Mistakes worth avoiding
- Buying on yield alone; a very high yield often signals an expected cut.
- Using a single unusual year's earnings for the payout ratio.
- Ignoring debt, which competes with shareholders for cash.
Questions
What does the Dividend Safety Calculator do?
Check whether a dividend is covered by earnings and free cash flow, what yield you're really getting, and whether it looks sustainable.
How should I use the result?
Yield is dividend per share over price. Payout ratio is dividend over earnings; cover is free cash flow per share over the dividend. A six-point score adds marks for a payout under 60% or 80%, cash cover above 1.3× or 1×, leverage under 2× EBITDA and positive dividend growth.
Does TechBullion store the information I enter?
The core calculation or transformation runs in your browser. Normal website security and analytics may still record page-level events, but the tool does not need to create a public record from your inputs.
What mistakes do people make with a dividend safety calculator?
Buying on yield alone; a very high yield often signals an expected cut. Using a single unusual year's earnings for the payout ratio. Ignoring debt, which competes with shareholders for cash.
Is the result guaranteed?
No. Use the result as a practical check or planning aid and verify important decisions with the relevant primary source, provider or professional advice.
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Results are estimates based on the figures entered, for general information only, and not financial, investment, tax or legal advice. See our terms of use.