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Dividend Cover
The dividend cover ratio tells us how easily a business can pay its dividend from profits. A high dividend cover means that the company can easily afford to pay the dividend and a low value means that the business might have difficulty paying a dividend. Here's the formula followed by an example.
| Dividend cover | = | Net profit available to equity shareholders |
| Dividends paid to equity shareholders |
Since the Carphone Warehouse hasn't paid a dividend, let's turn to Vodafone immediately. In the database find the data you need to calculate the dividend coverage for the two years for which we have data for Vodafone and calculate the dividend cover ratio for those two years. Here's a template for you to fill in with the data you find.
Vodafone
Consolidated profit and loss account | 31 Mar 2002 | 31 Mar 2001 |
|---|
| | £m | £m |
|---|
| Profit for the financial period | | |
| Dividends | | |
| Vodafone dividend cover | 31 Mar 2002 | 31 Mar 2001 |
|---|
| Profit for the financial period | | | | |
| Dividends | | |
Did you get this?
In this case, we see a terrible situation, as usual, for Vodafone. The profit for the period is in fact negative, so these results are dreadful - even though the values are positive, that is only because of the mathematics ... Vodafone has no dividend cover at all for these two years.
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