Preferred Dividend Coverage Ratio

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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.
References in periodicals archive ?
Fixed charge and preferred dividend coverage ratios are expected to decline only modestly from the 6.
Operating-earnings-based interest and preferred dividend coverage ratios that fall below roughly 10 times (x);
Favorable underwriting performance fueled by fewer catastrophe related losses and recognition of reserve redundancies contributed to higher GAAP interest and preferred dividend coverage ratios and a number of companies continue to hold cash at higher than traditional levels at the holding company level.