Dividend coverage
InvestingDefinition
A company's ability to sustain its dividend, measured by earnings or free cash flow per share divided by dividend per share. Below 1x = paying more in dividends than the business earns — unsustainable, often funded by debt.
Watch coverage trends, not just absolute level: a stock at 1.5x coverage that's been falling steadily is more concerning than a stock at 1.2x that's been rising.
Watch coverage trends, not just absolute level: a stock at 1.5x coverage that's been falling steadily is more concerning than a stock at 1.2x that's been rising.
Formula
Coverage = EPS / DPS or FCF / DPS