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Use Both the Dividend Cushion Ratio (Probability of a Dividend Cut) and the Qualitative Dividend Ratings in Your Assessment of the Payout

publication date: Nov 10, 2023
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The Dividend Cushion ratio ranks companies on the probability of a dividend cut in the longer run, while the qualitative ratings in part assess the outlook for the health of the payout in the near term in the context of management’s willingness to preserve and raise the payout. Since the systematic application of the Dividend Cushion ratio across our coverage in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90% at identifying the risks of a dividend cut in advance of the event.


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