imported>Doug Williamson |
imported>Doug Williamson |
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| Profit attributable to ordinary shareholders (earnings) ÷ Dividends.
| | ''Bank prudential management - historical.'' |
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| | | Fully Loaded Basel III, sometimes written 'FLB3'. |
| Dividend cover measures the safety or sustainability of the future dividend flow, from the perspective of the investor.
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| The greater the cover ratio, the greater the assumed likelihood that the firm paying the dividend will continue to be able to pay it in the future.
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| In the situation where the cover ratio falls below 1.0, the dividend is said to be ''uncovered'' and it will not be sustainable at its previous level unless there is a recovery in the firm's profits.
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| Also known as the dividend cover ratio.
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| <span style="color:#4B0082">'''Example 1'''</span>
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| GeeCo's profits attributable to ordinary shareholders (earnings) are £600m.
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| Its dividends for the same period are £200m.
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| The dividend cover is:
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| 600 / 200
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| = 3 times
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| '''Alternative calculation'''
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| Dividend cover can also be calculated on a per-share basis, producing exactly the same result, as:
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| Dividend cover = EPS / DPS
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| ''Where:''
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| EPS = earnings per share
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| DPS = dividends per share
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| <span style="color:#4B0082">'''Example 2'''</span>
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| GeeCo's earnings per share were 12p.
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| Its dividends per share for the same period were 4p.
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| The dividend cover was:
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| 12 / 4
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| = 3 times
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| == See also == | | == See also == |
| * [[Cover ratio]] | | * [[Bank supervision]] |
| * [[Dividend yield]] | | * [[Basel III]] |
| * [[Dividend]] | | * [[Fully loaded Basel III]] |
| * [[DPS]]
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| * [[Earnings]]
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| * [[Earnings per share]]
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| * [[Profit attributable to ordinary shareholders]]
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| [[Category:Corporate_finance]] | | [[Category:Accounting,_tax_and_regulation]] |
