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What is dividend coverage ratio (DCR)?

The Dividend Coverage Ratio, also known as dividend cover, is a financial metric that measures the number of times that a company can pay dividends to its shareholders. The dividend coverage ratio is the ratio of the company’s net income divided by the dividend paid to shareholders. The general formula for calculating DCR is as follows:

What is dividend coverage ratio?

The Dividend Coverage Ratio assesses a company's ability to pay dividends from its earnings, indicating if it has sufficient earnings to cover dividends. Investors and financial analysts who use this metric could have different scenarios that are as follows:

How to calculate dividend coverage ratio in Excel?

Calculating DCR in Excel is a straightforward process: Enter the company’s net income in cell A1. Position the total cash dividends paid in cell B1. In cell C1, integrate the formula =A1/B1. Your dividend coverage ratio will appear in cell C1. Drag the formula downward to autopopulate for multiple periods or years.

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