Dividend cover
Dividend cover compares earnings available to ordinary shareholders with ordinary dividends, often as earnings per share divided by dividend per share on a consistent basis. It indicates how many times earnings cover the dividend; the convention and period should be stated.
Worked example
If earnings per share are 40 and ordinary dividend per share is 10, dividend cover is 40 ÷ 10 = 4 times.
Common mistake
Dividend cover is an earnings measure; it does not by itself demonstrate the cash available to pay dividends.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | FR | Supporting | September 2026–June 2027 |