Summary
Dividend Coverage measures how many times a company’s earnings can cover its dividend payments. It is another way to assess whether dividends are supported by profits.
Higher coverage generally indicates a greater ability to maintain dividend payments.
Why it matters
Dividend Coverage helps investors evaluate the safety of a dividend. A company with strong coverage may be better able to continue paying dividends even if earnings weaken.
Low coverage may suggest that dividend payments are more vulnerable to reduction.
How it is calculated
Dividend Coverage = Earnings Per Share ÷ Dividend per Share
How to read it
A higher Dividend Coverage ratio generally suggests stronger dividend support. A lower ratio may indicate that most earnings are being paid out as dividends.
Investors should review this metric together with cash flow, payout ratio, and earnings stability.