Definition: What is Preferred Dividend Coverage Ratio?
The preferred dividend coverage ratio is the financial ratio that is used to measuring the ability of the company to pay the dividends owed to its preferred shareholders based on the net income of the company.
The company which has sufficient profit for the payment of dividends is deemed to be doing well.
For the evaluation of the financial health of the company, it is a very important calculation for shareholders and debtholders also.
Banks and creditors use this ratio and find, how much additional debt a company can handle. If the result of this calculation is 1 or greater then 1 then the company is in a good position. If the result is in the negative number then the company is in trouble.
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