Insurer Legal & General (LSE: LGEN) and tobacco company Imperial Brands (LSE: IMB) are two of the highest-yielding dividend stocks in the FTSE 100 at the moment. Both currently yield over 7%.

There’s no such thing as a free lunch in the investment world, however. This begs the question – which is the safer dividend stock today?

How can we assess safety?

There are several ways to assess the safety of a dividend stock. One is to consider the business model and long-term growth potential of the company along with the risks.

Taking a big-picture view like this can help to determine if a dividend payout is going to be sustainable. It can also help investors avoid stocks with sliding share prices (there’s little point in picking up dividends from a company if its share price is continually moving lower).

Comparing Legal & General and Imperial Brands, the former appears to have a more robust business model at first glance. It operates in growth industries such as investment management and retirement solutions whereas Imperial Brands operates in tobacco – an industry that’s structurally challenged.

That said, analysts expect Legal & General to face more intense competition in the Pension Risk Transfer market in the years ahead. This is a major risk – it could threaten profits and dividends.

How sustainable are the payouts?

Another strategy is to look at dividend coverage. This is the ratio of earnings per share to dividends per share and it can provide clues in relation to how sustainable a company’s payout is.

Generally speaking, a ratio of two or more is considered healthy. A ratio near or below one is considered very risky.

Zooming in on Legal & General, its dividend coverage is a little thin. With analysts expecting earnings per share of 28.6p this year versus a dividend payout of 22.2p per share, we get a ratio of about 1.3.

As for Imperial Brands, its coverage looks healthy. For the financial year that started on 1 October, analysts expect earnings of 334p versus a payout of 167p, giving us a ratio of a little over two, so it’s the clear winner here.

Is there valuation risk?

Of course, valuation can also play a role in assessing how safe a stock is. If a stock is overvalued, it could potentially see share price weakness.

Here, Legal & General sports a forward-looking price-to-earnings (P/E) ratio of about 10 while Imperial Brands’ ratio is about 6.8. So, both stocks are quite cheap but Imperial Brands is cheaper and perhaps offers more of a margin of safety.

What do brokers think?

Finally, it can be worth looking at brokers’ ratings. If a stock has a ton of Sell ratings, it can signal that it’s risky.

Here, Imperial Brands has nine Buy ratings and six Holds while Legal & General has four Buy ratings, two Holds, and 11 Sell ratings. So, Legal & General definitely looks riskier by this metric.

The safer stock is…

Putting this all together, you could argue that Imperial Brands is actually the safer dividend stock right now, despite the fact that it operates in a structurally-challenged industry. It has a lower valuation, better dividend coverage, and stronger broker ratings.

Both could still be worth considering for income though. As could this high yielder in the FTSE 100…

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Edward Sheldon does not hold any positions in the companies mentioned.