The Dividend Coverage Ratio, or dividend cover, is a way to see how many times a company can give dividends to its shareholders out of its profits.


The ratio tells you if a company can keep up with its dividend payments based on what it earns. Investors usually look for ratio larger than 2 but this is heavily depedent on business sector. Lower ratios are usually okay with Utilities companies but for example in Retail in might be warning sign.


To find the Dividend Coverage Ratio, you divide the company's net income by the dividends it plans to pay.

In this manner Dividend coverage ratio is reverse Payout Ratio which is more widely used and it’s showing the stock in same perspective.

 = (Net income - preferred dividends) / dividends.

 is what the company earns after paying all its bills and taxes. 

 are the cash it wants to give to shareholders.

Let's say a company earns 2400 bucks after taxes and wants to give out 1000 bucks in dividends. The dividend cover here would be 2.4. This means the company is earning enough to pay the dividend 2.4 times over.


When evaluating safety of dividend stocks the best first step you can take is to check out dividend safety score which evaluates 6 different paramaters including dividend payout ratio.

Dividend coverage ratio explained

Safety Shot, Inc. (SHOT) has seen a significant increase in its stock value, rising by over 300% in the past month. So what is the deal with the company and why the stock is one of the most searched stock in last days?

Based in Florida, the company has carved a niche in the market with its unique beverage designed to reduce blood alcohol content and enhance clarity. It is focused on end consumers seeking a quick recovery from alcohol effects.

Safety Shot introduced its patented beverage on Amazon, which quickly sold out within hours of its release, and it attracted lot of investors.

The company is currently conducting a double-blind, placebo-controlled trial to assess the effects of Safety Shot on blood and breath alcohol levels. The anticipation of the trial's results, expected in Q1 202, and it’s why so many investors are currently bullish on the stock.

Company have currently negative EBITDA of -$4M, and it’s currently very speculative bet with unclear results. Always do your research before investing.

What is SHOT and why it is up by 300% in last month?

Dividend ratios offer a window into the financial health and future prospects of companies. If you use them properly it will allow you to properly assess  ability to generate, sustain, and grow dividend payments. 

Shows how much a company pays out in dividends each year relative to its stock price. This will give you glimpse of what amount of dividend you get from company. There are two types of this ratio:

 It is calculated by dividing the annual dividends per share by the price per share.

 Estimate of a company's dividend yield over the next year, based on recent dividend payments. Instead of using past dividends, it uses the sum of the company's expected future dividends over the next year

Calculated either as the annual dividend per share (DPS) divided by the earnings per share (EPS). It shows what portion of a company's annual earnings per share is paid out as cash dividends.

High payout ratios indicate higher risk of reducing future dividend or that company doesn’t invest in itself.

Investors should compare a company's dividend payout ratio with industry averages or similar companies.

Evaluate the growth in a company's dividend payments over a three-year period. This ratio helps investors understand how a company's dividend payouts have changed over time, particularly focusing on its growth or consistency. You can usually see two types:

 Indicated average annual growth over period


Calculated by dividing a company's annual EPS by its annual dividend. This ratio indicates how many times a company could pay dividends to its common shareholders from its net profit for a specific period. A higher dividend coverage ratio is generally more favorable.

5) The Free Cash Flow Dividend Payout Ratio

Free Cash Flow (FCF) is metric that shows the amount of cash a company generates after accounting for the cash outflows (expenses in simple words). This is important for few different metrics.

At dividend.watch we like to use one powerful ratio called Free Cash Flow Dividend Payout Ratio

Is a financial metric that compares the dividends a company pays to its shareholders to the amount of free cash flow it generates. This ratio is important because it helps investors understand how much of the company's cash from operations is being used to pay dividends, and whether this level of dividend payment is sustainable. 

5 best dividend ratios explained

In the world of artificial intelligence, two names often dominate the conversation: Microsoft and Nvidia. Microsoft has been in the spotlight due to owning a significant 49% stake in the AI powerhouse, OpenAI.

Last Friday, an unexpected turn of events shook Silicon Valley. OpenAI's board of directors made a surprising move, dismissing the company's CEO and most prominent face, Sam Altman. Over the weekend, the tech world buzzed with speculation and discussions about the reasons and implications of this sudden change.

Sam Altman, alongside his close associate Greg Brockman (who also departed from his roles as president and chairman in response to Altman's firing), are giants in the AI field. Their departure marked a pivotal moment for one of the most closely-watched startups. Rumors swirled about Altman's plans to launch a new venture, but as the dust settled, it became clear: Altman and Brockman would join forces with Microsoft.

Often celebrated for its AI prowess, Microsoft's strength extends far beyond this single domain. It's a powerhouse in various sectors, including gaming, hardware, and business services. Personal computing, primarily through Windows, accounts for just about 25% of the company's turnover.

An often-overlooked gem in Microsoft's crown is LinkedIn, a social network that has flourished under its umbrella. The importance of unrestricted access to a social network is evident in projects like xAI Grok and its live access to X (formerly Twitter).

This development underscores Microsoft's agility and commitment to AI, championing CEO Satya Nadella's quick and decisive action. The company isn't just riding the AI wave – it's shaping it.

From an investor's lens, Microsoft is a tantalizing option.

According to dividend.watch, the stock ticks all the boxes in terms of 

. However, the question remains: Is the current all-time high the right moment to invest? With a current P/E ratio of 36, Microsoft stands pricier than other tech titans like Apple and Meta.

Microsoft's strategic moves in AI signal a new era in technology, driven by innovation and diversified strength. As the tech giant continues to make waves, investors and industry watchers alike are keen to see what's next in this exciting journey.

 Keep an eye on Microsoft – a tech titan that's not just about AI, but about shaping the future of technology in multiple ways.