Covered grower — sub-1% yield. A 0.83% yield on a 36.3% indicated payout is covered, compounding income at a small current size: $0.2475 a quarter, raised in February 2026 for the 53rd consecutive year. The yield is small because the price ran to $119.89, not because the check lacks coverage — a $10,000 position pays about $83 a year at this price, so the case rests on the raises compounding, not on income collected now.
Key risk: Free cash flow is the tight line, not earnings: FY2026 free cash flow of about $14.9 billion ($41.6 billion of operating cash flow minus $26.6 billion of capital spending) covered the $7.5 billion of dividends paid about 2.0×, but buybacks took another $8.1 billion. If operating cash flow stalls while capital spending and buybacks stay at that pace, the size of future raises is what gets squeezed.
Changes if: The yield reaches the ~1% income line — at $0.99 a year that takes a price near $99, or a materially larger raise — or coverage changes: an indicated payout pushed past roughly 50% of reported earnings, or a year in which free cash flow falls short of the dividend, would change the read.
- ✓Payout-coverage check: 36.3% indicated — $0.99 against $2.73 of FY2026 reported diluted EPS. Free cash flow covered the cash actually paid: about $14.9 billion in FY2026 against $7.5 billion of dividends paid, about 2.0×.
- !Yield check: 0.83% indicated — $0.2475/qtr × 4 ÷ $119.89, the Oct. 23, 2026 close. Below the House income line for a single stock: the yield is small because the price ran, and a $10,000 position pays about $83 a year.
- ✓Dividend growth check: 53 consecutive years of increases. The Feb. 19, 2026 declaration lifted the annual dividend 5%, from $0.94 to $0.99 — the quarterly installment from $0.235 to $0.2475.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.