Dividend sustainability check.

Dividend cover (also called dividend coverage ratio) measures sustainability: earnings per share / dividends per share. Above 2.0x = safely covered. 1.5-2.0x = healthy. 1.0-1.5x = adequate but no safety margin. Below 1.0x = company paying out more than it earns (unsustainable).

Example: company earns 4 EPS, pays 2 dividend. Cover = 2.0x (safe). Same company earns 2 EPS, pays 2 dividend. Cover = 1.0x (no margin). If earnings drop 20%, cover = 0.8x - dividend cut likely. Dividend trap warning: high yields with low cover often precede dividend cuts (Vodafone, Centrica, Persimmon historical examples).

Dividend cover vs payout ratio: same metric inverted. Cover 2.0x = payout ratio 50%. Industry varies: utilities/REITs payout 70-90% (cover 1.1-1.4x) - normal for stable businesses. Tech: payout 0-30% (cover 3-10x) - growth reinvested. Watch trend more than absolute - declining cover over years signals stress, even if still above 1.0x.

A worked example

Try the defaults: earnings per share of 4, dividends per share of 2. The tool returns 2.00x. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Earnings Per Share (EPS) and Dividends Per Share (DPS). Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

The formula behind this

Dividend cover = EPS / DPS. Payout ratio = DPS / EPS × 100. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Why investors run this

Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.