Dividend Coverage Ratio Template

Written by CFI Team

Dividend Coverage Ratio Template

This Dividend Coverage Ratio Template will show you the calculation for dividend coverage ratios for common shareholders and preferred shareholders.

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Dividend Coverage Ratio Template Screenshot

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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.

Dividend Coverage Ratio Formula

The general formula for calculating DCR is as follows:

Dividend Coverage Ratio = Net income / Dividend declared

Where:

Net income is the earnings after all expenses, including taxes, are paid
Dividend declared is the amount of dividend entitled to shareholders

There are also some modified versions of the dividend coverage ratio, which will be discussed below.

The first variation is used to determine the number of times a company can pay dividends to common shareholders when the company also has preferred shares to take into consideration.

The formula is:

DCR = (Net income – Required preferred dividend payments) / Dividends declared to common shareholders

This variation can also be used to determine the number of times a company can pay dividends to preferred shareholders:

The formula is:

DCR = Net income / Dividends declared to preferred shareholders

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Additional Resources

CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:

The Financial Modeling Certification

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A well rounded financial analyst possesses all of the above skills!

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:

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