Definitions 
Dividend Cover is a ratio that gives an indication of the ability of a company to continue pay dividends to the shareholders. This is calculated by dividing the net profit after tax by the proposed dividend to shareholders.
For example, if a business declare a net profit after tax of 20p per share, and proposes a dividend of 5p. The dividend cover will be 4.
The Dividend Cover Formula
Dividend Cover = Net Profit after Tax / Proposed Dividend
Dividend Cover Reliability
Dividend cover does have its uses. However, nothing replaces in depth knowledge about the business, its products, competitors and customer base.
