Dividend Yield & Coverage Ratio Calculator
Category: Fundamental & Economic ToolsEvaluate dividend stocks by calculating key metrics such as dividend yield, payout ratio, and coverage ratio to make informed investment decisions
Stock Information
Dividend Information
Earnings Information
Dividend Metrics Results
Dividend Yield Comparison
Coverage & Payout Ratios
Dividend Growth Projection
Dividend Income Projection
| Year | Annual Dividend | Yield-on-Cost | Annual Income | Cumulative Income |
|---|
Dividend Investment Analysis
Dividend Yield Assessment
The current yield of 4.00% is above average compared to the broader market. This stock offers solid income potential for dividend-focused investors.
Dividend Safety Analysis
With a payout ratio of 50.0% and coverage ratio of 2.00x, this dividend appears to have strong safety. The company has sufficient earnings buffer to maintain payments even if earnings decline temporarily.
Growth Potential
Based on the projected dividend growth rate of 5.0% and earnings growth of 6.0%, this dividend has good potential for future increases. The dividend could outpace inflation over the long term.
Overall Dividend Quality
This stock demonstrates above-average dividend quality based on yield, safety, and growth potential. It may be suitable for income-focused investors looking for reliable income with moderate growth.
Understanding Dividend Metrics
Dividend metrics help investors evaluate the income potential, sustainability, and quality of a company's dividend payments. These measures are essential for income-focused investors to make informed decisions.
Key Dividend Metrics Explained
- Dividend Yield: Annual dividend divided by current stock price, showing income return on investment
- Payout Ratio: Percentage of earnings paid as dividends, indicating dividend sustainability
- Coverage Ratio: How many times earnings cover dividend payments (inverse of payout ratio)
- FCF Coverage Ratio: How well free cash flow covers dividend payments
- Real Yield: Dividend yield adjusted for inflation, showing true purchasing power
Interpreting Results
- Payout Ratio < 50%: Very safe dividend with room for growth
- Payout Ratio 50-75%: Reasonable sustainability with limited growth potential
- Payout Ratio > 75%: Limited safety margin, possible dividend risk
- Coverage Ratio > 2.0: Strong dividend safety
- FCF Coverage > Earnings Coverage: Indicates high-quality earnings backing dividends
Key Formulas
Dividend Investment Strategies
Income Investing
Focus on high current yield (4%+) with sustainable payout ratios to generate regular income for living expenses or reinvestment.
Dividend Growth
Prioritize companies with moderate yields (2-4%) but strong growth rates (8%+) and low payout ratios (under 50%) for long-term compounding.
Dividend Aristocrats
Invest in companies with 25+ years of consecutive dividend increases for proven reliability and management commitment to shareholders.
Dividend Reinvestment
Reinvest dividends to purchase additional shares, creating a powerful compounding effect that accelerates wealth building over time.
What this calculates
Dividend yield, and how comfortably earnings cover the payout.
- Formula
yield = annual dividend ÷ share price; cover = earnings per share ÷ dividend per share- Worked example
- A 4 HKD dividend on a 100 HKD share yields 4%. With EPS of 8, cover is 2× — comfortable.
- When to use it
- When buying for income, to test whether the dividend is sustainable.
- Common mistake
- A very high yield usually means the price has fallen because the market expects a cut. Check cover before treating yield as income.