As longtime dividend investors are aware, no company’s payout is guaranteed. A dividend payer can reduce, suspend, or eliminate its regular cash payment to shareholders at any time, usually due to pressure on the business. Dividend cuts are typically accompanied by share price declines and translate into a poor shareholder experience. In recent years, several well-known US companies have cut their dividends, including Dow Inc., Walgreens, 3M, Intel, and Harley-Davidson. In July, Conagra Brands, whose grocery store staples include Slim Jim, Duncan Hines, and Reddi-wip, announced a dividend cut.
Morningstar Indexes has embedded several dividend durability screens into its equity income indexes to help investors sidestep “dividend traps” ― companies with impressive yields that may ultimately be unsustainable.
In a recent analysis on Morningstar.com, Dan Lefkovitz and Saumya Gattani, a quantitative researcher at Morningstar Indexes, identified 15 companies that flashed warning signs of dividend instability at index reconstitution in June. They looked at the payout ratio, which measures the degree to which the dividend is covered by the company’s earnings, distance to default, the risk that the value of a company’s assets will fall below the sum of its liabilities, and a company’s economic moat or durable competitive advantage.
Dan Lefkovitz – Strategist, Morningstar Indexes
“When high-yielding, name-brand companies cut their dividends, it’s worth pondering whether investors could have identified them in advance. The market’s juiciest payouts are often fleeting. Screening on dividend history doesn’t tell you much about the durability of the payout going forward. Therefore, it’s important to employ predictive screens for dividend durability.”
Source: Morningstar Indexes. Data as of June 22, 2026.
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