Dividend Coverage Ratio
Abbreviation: DCR
Plain-English definition
In the approved Fly High method, Dividend Coverage Ratio equals the Four-Quarter Annualized Earnings Estimate divided by annualized included dividends.
Why it matters
The ratio puts estimated earnings and dividends on the same annualized, per-share basis. A result above 1.00 means the estimate exceeds included dividends, while a result below 1.00 means the estimate falls short. Neither result guarantees what happens next.
Example
If annualized earnings are $2.10 per share and annualized included dividends are $2.00 per share, Dividend Coverage Ratio is 1.05, or 105%.
How income investors use it
Confirm that the numerator and denominator use matching periods, per-share units, and the correct company-specific earnings definition. Refresh the calculation after each earnings report and whenever an included dividend changes.
Fly High perspective
Annualized earnings are the two most recently reported quarters of actual company-specific earnings plus the next two quarters of current independent analyst consensus. Included dividends are the regular dividend plus supplemental dividends paid regularly. Irregular special dividends are excluded.
This material is general education, not individualized investment, tax, or legal advice.