IN PLAIN ENGLISH
How many times over earnings could pay the dividend. Around 2× is roomy.
WHERE YOU MEET IT
Div Cover in a holding's detail, worked out as 1 ÷ payout ratio.
WATCH OUT FOR
Coverage under 1× means the company is paying you out of somewhere else.
FULL DEFINITION
The ratio of a company's earnings to the dividend paid to shareholders, calculated as earnings per share divided by the dividend per share.
EXAMPLE
Profit is £100. Dividend payment is £50. Coverage = 2x. They could pay the dividend twice with that money.
HOW IT'S CALCULATED
Worked out by the app as 1 ÷ payout ratio, which is the same thing as earnings per share ÷ dividends per share over the trailing twelve months. It is taken from the market data provider's payout ratio rather than from its separate earnings and dividend figures, because for many London-listed companies those two arrive in different currencies. Because it is the payout ratio turned upside down, it adds no information the payout ratio doesn't already carry. Shows N/A when the payout ratio is 0 (no dividend) or missing, as it is for funds. Shown as a multiple, so 2.00 means earnings were twice the dividend. It is based on profit, not cash; see Cash Flow Coverage for the cash version.
EXPLAINED IN
Educational content only. It is not personal financial advice.