Dividend covenants

A covenant is a promise. A dividend covenant will usually be a promise to long-term lenders limiting the levels of dividends. The reason will be to give the lenders more security and may be needed to persuade lenders to lend money. I do not remember them ever being mentioned in Paper FM, and if they were then you would have to be told precisely what was agreed.

It was mentioned in a few answers to section c questions in the kit in regards to dividend policies of companies. Thank you for the explanation :)

You are welcome :-)