Preferred Dividend Coverage Ratio

Preferred Dividend Coverage Ratio

A measure of a publicly-traded company's ability to pay dividends to preferred stockholders. It is calculated by taking the company's net income and dividing it by the total preferred dividends it must pay. A ratio over 1 indicates that the company is able to make dividend payments, while a ratio below 1 indicates that it cannot. The preferred dividend coverage ratio is particularly important because dividends to preferred stockholders are set and guaranteed. Failure to pay them can be highly detrimental to the company because preferred stockholders, under some circumstances, can force its liquidation to receive back dividends.
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The company's ratings could be lowered if it does not achieve a preferred dividend coverage ratio of at least 3.
On a pro forma basis, Fitch estimates PartnerRe's equity-credit-adjusted ratio of debt plus preferred shares-to-total capital at approximately 14% and the company's run-rate interest plus preferred dividend coverage ratio to remain in the mid-to high single digits.
In addition, as a result of lower interest and preferred dividend requirements, together with stronger earnings, FG's fixed- charge and preferred dividend coverage ratio improved to 2.
On a pro forma basis Fitch estimates Endurance's equity-credit-adjusted ratio of debt plus preferred shares-to-total capital at approximately 17% and the company's run-rate interest plus preferred dividend coverage ratio in the mid-single digits.
In addition, as a result of lower interest and preferred dividend requirements, together with stronger earnings, FG's fixed-charge and preferred dividend coverage ratio improved to 2.
Lower interest and preferred dividend expenses resulted in a stronger interest plus preferred dividend coverage ratio (EBITDA divided by interest expense plus preferred dividend, all for the last twelve months) of 5.
The ratings on the company could be lowered again if it does not maintain its Minimum Capital Test (MCT) ratio at or above 150%, achieve a preferred dividend coverage ratio of at least 2.
These targets would include achieving a preferred dividend coverage ratio of at least 3.
Operating-earnings-based interest and preferred dividend coverage ratios that fall below roughly 10 times (x);
Fixed charge and preferred dividend coverage ratios are expected to decline only modestly from the 6.