Dividend Cover

The extent to which a company's dividend is matched or exceeded by the earnings available for distribution to shareholders. A dividend cover of three means that shareholder's attributable profit is three times the dividend paid out. The size of the dividend cover gives an indication of a company's ability to maintain its dividend should profits fall. This would be of considerable significance for the shares of a company with volatile earnings. For the shares of a company with stable profits lower dividend cover would be less significant. A company's market capitalization tends to increase as the multiple rises.