I am looking at investing in a few companies which offer preferred stock. Do their dividend coverage ratios factor in the dividends being paid to preferred shareholders? If not, how can I find or determine an 'adjusted dividend coverage ratio' that includes preferred stock? Thank you.
1 Answer
Dividend Coverage Ratio is calculated as the total net income minus any required preferred dividend, divided by the amount of the dividend. It can also be calculated as EPS/DPS, where EPS is net income minus preferred dividends.
So, yes, they factor in the dividends being paid to preferred shareholders.