dividend cover


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dividend cover

n
(Banking & Finance) the number of times that a company's dividends to shareholders could be paid out of its annual profits after tax, used as an indication of the probability that dividends will be maintained in subsequent years
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Our dividend policy is to pay dividends with a dividend cover range based on CHEPS.
"The solid performance and cash generative nature of our portfolio has enabled us once more to increase our dividend in line with RPI [retail price index] whilst maintaining strong dividend cover," said Tim Ingram, the chairman of Greencoat UK Wind.
Indeed, there are growing warnings that dividend cover is getting thin on the ground, which could put pressure on firms to cut payouts.
The latter would imply Occidental's future "dividend growth or even dividend cover is not as strong as we had assumed," he adds.
The acquisition is earnings accretive and, all other things being equal, will increase dividend cover by c.10%.
- Deterioration of dividend cover below 5.0x on a sustained basis, as a result of structurally lower dividends from underlying companies
Centrica also said it may have to operate with historically low dividend cover "for a period of time" to maintain shareholder payouts.
The latest research by The Share Centre shows dividend cover - a ratio of profit after tax divided by dividends paid - is 18 per cent lower than a year ago and half the level of just two years ago.
The ten ratios that were used for conducting firm performance analysis included Acid Test Ratio, Financial Expenses as Percent of Sales Ratio, Current Ratio, Debt to Equity Ratio, Return on Assets Ratio, Return on Equity Ratio, Dividend Cover Ratio, Net Profit Margin Ratio, Earnings per Share after Tax Ratio, and Break-Up Value Shares Ratio.
This is a function of lower dividend cover, meaning companies have less income retained for future investment.
"The pending $130bn US transaction will reward our shareholders for their long-term support of our strategy and will provide us with a strong balance sheet, improved dividend cover and the financial and strategic flexibility to make further investments in the business or returns to shareholders in the future," Colao said.
When investing for income, investors should take into account factors such as dividend cover, or the company's earnings per share divided by the share dividend.