Ask a Fool: Why Did General Electric Cut Its Dividend, and Are My Other Dividend Stocks Safe?

General Electric (NYSE: GE) cut its dividend in half in order to save money. The company hasn't been making enough money to cover its dividend recently, and the cut will save GE more than $4 billion per year. GE's free cash flow has declined for six years in a row, so cost-cutting measures had become necessary.

There's no way to predict with 100% reliability whether a company will be able to maintain or grow its dividend payments in perpetuity, but there are a few things that can indicate your dividends might be in trouble.

The most important dividend-related metric to know is the payout ratio. This is simply a stock's dividend, expressed as a percentage of its earnings. For example, if a stock pays $0.50 in dividends this year and earns $1.00, its payout ratio is 50%. A payout ratio of 60% or less is generally considered healthy, and 100% or more implies that the stock isn't earning enough to pay its dividend.

Source: Fool.com