Dividend Coverage

To determine how stable a company’s dividends are, investors calculate the Cash to Dividend Coverage ratio. One way to help determine the stability of a company’s dividends is by estimating the company’s ability to meet its dividend payouts using only operating cash flows. The use of operating cash flows helps indicate whether a company’s core operations are contributing to financial strength, which, in turn, helps investors estimate whether related metrics are stable. 

Calculated as: Operating Cash Flow / Cash Dividends