Everyone knows the yield. Almost nobody checks the payout ratio by company. Strange, because the ratio is what tells you whether the yield survives contact with reality.
- Under 60% is comfortable, 60 to 80% is watch-it territory, above 80% the dividend exceeds what profits support - A ratio climbing over years (40, 55, 70) while earnings stagnate is a countdown, not generosity - One bad year can spike the ratio harmlessly; look at five years, not one - REITs and MLPs are the exception: near-90% is normal for them, so use funds-from-operations instead - The habit: check every holding once a year, like changing smoke-detector batteries
DivPlan ($4.99 one-time) shows the payout ratio by company with multi-year history, so the check takes seconds.