Analysis of Dividend Safety
Which of the following indicates the highest likelihood of a dividend cut?
No, actually.
An FCFE coverage ratio of 1.5 indicates that the company is retaining cash on its balance sheet, so dividends are safe.
No.
A dividend coverage ratio of 2.5x indicates that net income significantly covers dividends.
That's right!
A very high dividend yield relative to peers indicates a higher probability of a dividend cut because the high payment is liquidating cash reserves.
An FCFE coverage ratio of 1.5x
A dividend coverage ratio of 2.5x
A very high dividend yield relative to peers
