How the DividendsIQ Scores Work

Three scores - D, T and R - turn thousands of data points into a quick read on any dividend stock or fund. Here's what goes into each, and why every piece earns its place. (We keep the exact recipe private; the ideas are all here.)

A yield on its own says nothing about whether the dividend is safe, whether the price is sinking, or whether the company is fragile. So we split the judgment into three questions and give each its own score: Is the dividend safe and steady? (D), Is the price trend healthy? (T), and How financially sound is it? (R). Below is what feeds each one, in plain English.

The three scores at a glance

Why three, not one: a single "buy/sell" number hides the reasons. Separating dividend quality, price trend and risk lets you see why something scores well or badly.

Why they work across everything: the hard part is that different assets are measured with different metrics - earnings for one stock, cash flow for a REIT, holdings for an ETF, price behaviour for a fund. Each score does that digging under the hood and boils it down to one normalized number on the same scale. So a blue-chip stock, a REIT, an ETF and a CEF all get a D, T and R that mean the same thing - and you can compare them side by side instead of learning a new yardstick for each.

The scales
  • D - Dividend Quality: 0 to 100, higher is better.
  • T - Technical (price trend): 0 to 100, higher is better.
  • R - Risk: 1 to 5, lower is better (1-2 low risk, 4-5 high).
D

Dividend Quality

0 - 100 · higher is better

"Can I trust this dividend to keep coming - and growing?"

What goes in:

  • Growth track record - how the dividend has trended over several years, with recent years weighted more heavily than old ones.
  • Consistency - each year's total payout compared with the year before, in dollars, for every kind of asset: raised, held or cut. Cuts pull the score down.
  • Track record - how many years in a row it has paid; 8+ years earns extra credit.
  • Recent-cut check - whether the last year of real payments dropped versus the year before (an actual cut, not a forecast).
  • Yield-vs-its-own-normal - whether the yield has spiked far above the stock's own history, which usually means the market is pricing in a cut (a classic yield trap).
  • Payout sustainability - is it paying out more than it earns? This is our single Dividend Coverage metric, computed the right way for each asset (earnings for a stock, net investment income for a BDC, cash flow for a REIT, distributable cash flow for an MLP, NAV-vs-distribution for an income fund) and shown on one comparable scale where 1.0x is break-even.

Minimum history: a D score needs at least 3 full years of dividends. With less, it shows Not rated - too short a record to judge, not a bad score.

Why it makes sense These are the exact things that show up before a dividend gets cut - a stretched payout, a yield that looks too good, a first drop in payments. Rolling them into one score means a fragile dividend can't hide behind a big headline yield.
T

Technical (Price Trend)

0 - 100 · higher is better

"Is the market rewarding this over the long run, or bleeding me out?"

What goes in:

  • Long-term price trend - the direction and strength of the price over several years, not last week's noise.
  • Versus the market - extra credit for a strong trend that keeps up with the market index; thinly traded shares lose points.
  • Trend quality - measured so a single spike or crash at the edge of the window can't distort the picture, and extreme moves are capped.
Why it makes sense A great dividend on a permanently sinking stock still loses you money - the yield giveth and the price taketh away. T is the total-return sanity check: it catches value traps that look fine on yield alone, and confirms when a strong dividend is backed by a healthy price.
R

Risk

1 - 5 · lower is better

"How likely is the whole thing to break?"

What goes in - and it adapts to the asset:

  • For a company (stock): financial health - how much it borrows (leverage), whether cash flow covers its obligations and the dividend, and overall payout sustainability.
  • For an ETF: we look through to what it holds - the average risk of the companies it owns (weighted by size), the interest rate its bonds pay (riskier borrowers pay more), or, for a leveraged or option fund, the risk of what it tracks plus a step up for the leverage.
  • For a fund (CEF / mutual): its financial statements when they are usable; otherwise how bumpy the ride is - price swings, the worst drop, how much it moves with the market, how steady its payouts are, and its size.
Why it makes sense Different assets break for different reasons - a company from too much debt, an ETF from what it holds, a fund from wild swings or unsteady payouts. Rather than make you track a different metric for each, R does that digging under the hood and hands back one 1-5 number - so a stock, an ETF and a CEF all land on the same comparable scale. Same idea as the asset-types guide.

Reading the three together

The power is in the combination - the scores tell a story side by side:

  • High D, high T, low R - the sweet spot: a safe, growing dividend, a healthy price, a sturdy balance sheet.
  • High yield / decent D but high R - fragile: the income looks nice but the foundation is shaky. Handle with care.
  • Good D but weak T - a possible value trap or a falling knife: the dividend reads fine, but the market is walking away. Ask why.
  • Strong T but low D - a fine business that just isn't much of a dividend payer.

No single score is a verdict. Together they point you straight at the question worth asking about a given stock.

The bottom line: we don't publish the exact weights or formulas, but there's nothing mysterious about the ingredients - each one maps to a real way a dividend investment can disappoint you: a cut, a yield trap, a sinking price, a shaky balance sheet, an over-concentrated fund. The scores just measure them consistently across 20,000+ names so you don't have to. This is research, not investment advice.