Dividend Coverage Ratio
How many times a company's earnings (or cash flow) can cover its dividend payments.
What it is
The Dividend Coverage Ratio measures how comfortably a company can pay its dividend out of profits. It is the inverse of the payout ratio: a coverage ratio of 2 means earnings are twice the dividend, equal to a 50% payout ratio. It can be built from net earnings or, more conservatively, from free cash flow.
Why it matters
Higher coverage means a bigger cushion, so a temporary dip in earnings is less likely to force a dividend cut. Coverage near or below 1 is a warning that the dividend is being paid out of nearly all profit (or from debt or reserves) and may not be sustainable.
How it's calculated
Divide net income by total dividends paid (or use per-share figures: EPS divided by dividend per share). For a stricter view, divide free cash flow by dividends paid.
How Quintarthai uses it
Check earnings, free cash flow, and dividends paid side by side on a company's deep-analysis page (Financials 10-yr and Ratios tabs) to gauge coverage.