Preferred Dividend Coverage Ratio

What is the 'Preferred Dividend Coverage Ratio'

The preferred dividend coverage ratio is 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



BREAKING DOWN '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. Preferred Dividend

    A dividend that is accrued and paid on a company's preferred ...
  2. Current Dividend Preference

    A safety feature of preferred shares, whereby holders of such ...
  3. Cumulative Preferred Stock

    A type of preferred stock with a provision that stipulates that ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  5. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
  6. Dividend Rate

    The total expected dividend payments from an investment, fund ...
Related Articles
  1. Investing

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  2. Markets

    4 Ratios to Evaluate Dividend Stocks

    Discover details about fundamental analysis ratios that could help to evaluate dividend paying stocks, and learn how to calculate these ratios.
  3. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  4. Investing

    An Example of Dividends in Arrears

    Learn about the concept of dividends in arrears and which shares of stock guarantee payment of accrued dividends even if the company doesn't turn a profit.
  5. Investing

    How to Calculate a Coverage Ratio

    In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
  6. Investing

    Valuation Of A Preferred Stock

    Determining the value of a preferred stock is important for your portfolio. Learn how it's done.
  7. Markets

    4 Reasons a Company Might Suspend Its Dividend

    Learn about the four most common reasons a company may choose to suspends its dividends, including financial trouble, funding growth and unexpected expenses.
  8. Markets

    General Electric Stock: A Dividend Analysis

    Read a detailed analysis of the dividend policy of General Electric Company, and explore a comparison of the dividend policies of its competitors.
  9. Investing

    The 3 Biggest Misconceptions of Dividend Stocks

    To find the best dividend stocks, focus on total return, not yield.
  10. Managing Wealth

    Boeing Co. Stock: A Dividend Analysis (BA)

    Learn about The Boeing Company, its financials and its dividends, which may signal further dividend growth due to its increasing cash flow and earnings.
RELATED FAQS
  1. How are preferred stock dividends taxed?

    Discover the intriguing debt and equity characteristics of preferred stock, and learn about how preferred stock dividends ... Read Answer >>
  2. What can cause the marginal propensity to consume to change over time?

    Learn about the dividend payout ratio and dividend yield, what the ratios measure and the difference between the dividend ... Read Answer >>
  3. Can I receive dividends on ordinary shares of a company?

    Understand the basics of collecting dividend payments on ordinary shares, including when dividends can be paid and under ... Read Answer >>
  4. What is the difference between the dividend yield and the dividend payout ratio?

    Learn the differences between a stock's dividend yield and its dividend payout ratio, and learn why the latter might be a ... Read Answer >>
  5. What is the difference between dividend yield and dividend payout ratio?

    Understand the difference between the dividend yield and the dividend payout ratio, two basic investment valuation measures ... Read Answer >>
  6. What are some possible red flags in a company's dividend payout ratio?

    Read about how investors and analysts use the dividend payout ratio to scrutinize the sustainability of a company's dividend ... Read Answer >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center