Preferred Dividend Coverage Ratio


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.


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.

  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Dividend

    A distribution of a portion of a company's earnings, decided ...
  3. Shareholder

    Any person, company or other institution that owns at least one ...
  4. Common Stock

    A security that represents ownership in a corporation. Holders ...
  5. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
  6. Profit

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