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# Why I Built the IQ Score
- URL: https://incomequalityscore.com/why-i-built-iq-score/
- Published: 2026-07-09T14:42:21.000Z
- Updated: 2026-07-15T05:52:55.000Z
- Description: A durability-first way to tell income Friends from Foes — and why yield alone lies.
- Author: Joost Rijlaarsdam
- Tags: IQ Score, Income Investing

# Why I Built the IQ Score

Most income screeners reward one thing: yield. A fund pays 11%, it floats to the top of the list, and the story ends there. But yield is a *decision the fund made*, not evidence that the fund can keep making it. Plenty of high-yield vehicles fund their distributions out of your own capital and call it income.

The **IQ Score** is my attempt to separate durable income from decaying income — to tell a **Friend** from a **Foe** before the cut, not after.

## What it actually measures

The score is built from five long-duration signals computed from years of price and distribution history:

- **Economic payout coverage** — total return versus what was distributed. The primary truth metric.
- **Working-capital preservation** — is the price base holding, or eroding?
- **Distribution stability** — how often has the payout been cut?
- **Distribution trend** — is the payout growing or drifting down?
- **NAV persistence** — for closed-end funds, does net asset value survive the distribution?

Every engine is calibrated so that **yield alone never buys a Friend label**. A yield trap has to clear the same durability bar as everything else.

## Friend, Question Mark, Foe

The output is deliberately blunt: three labels instead of a false-precision number.

- **Friend** — the evidence supports durable income.
- **Question Mark** — mixed, or not enough history to say.
- **Foe** — the numbers say the distribution is living on borrowed time.

It is an *observational* layer. It does not trade, it does not size positions, and it never tells you what to buy. It just tells you which side of the durability line a security sits on — and lets you decide what to do with that.

That distinction is the whole point.