Preferred Dividend Coverage Ratio

AAA

DEFINITION of 'Preferred Dividend Coverage Ratio'

A coverage ratio that measures a company's ability to pay off its required preferred dividend payments. A healthy company will have a high coverage ratio, indicating that it has little difficulty in paying off its preferred dividend requirements.

Formula:

Preferred Dividend Coverage Ratio



INVESTOPEDIA EXPLAINS 'Preferred Dividend Coverage Ratio'

Not only does this ratio give investors an idea of a company's ability to pay off its preferred dividend requirements, but it also gives common shareholders an idea of how likely they are to be paid dividends. If the company has a hard time covering its preferred dividend requirements, common shareholders are less likely to receive a dividend payment on their holdings.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Profit

    A financial benefit that is realized when the amount of revenue ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Coverage Ratio

    A measure of a company's ability to meet its financial obligations. ...
Related Articles
  1. Investing

    What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the good times when the ...
  2. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  3. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  4. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  5. Active Trading Fundamentals

    What telecommunication stocks pay the highest dividends?

    Learn about the yields offered by five of the highest dividend paying companies within the telecommunications market sector.
  6. Fundamental Analysis

    What is the difference between market capitalization and enterprise value?

    Understand the basics of market capitalization and enterprise value, how they measure company value and how they differ in calculation and precision.
  7. Investing Basics

    Are utility stocks bought for income or growth?

    Learn why the shares of government-protected utility companies have proven to be among the most consistent income stocks in the marketplace.
  8. Investing Basics

    What is the difference between dividends and capital gains?

    Read about some of the differences between dividends and capital gains, the two primary ways of accumulating wealth through the stock market.
  9. Active Trading Fundamentals

    With an ex-dividend, why does the dividend go to the seller rather than the buyer?

    Find out why ex-dividend payments are sent to the seller of a stock rather than the purchaser and how ex-dividends can create trading opportunities.
  10. Technical Indicators

    What is the Ease Of Movement Indicator formula and how is it calculated?

    Read about and learn how to calculate the Ease of Movement indicator, created by Richard W. Arms Jr., to help measure the relationship between price and volume.

You May Also Like

Hot Definitions
  1. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would ...
  2. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  3. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  4. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  5. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  6. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
Trading Center