Coverage ratio
How many times earnings (or free cash flow) covers the dividend obligation.
Coverage ratio is the inverse framing of payout ratio: earnings ÷ dividends. A ratio of 2× means the company earns twice what it pays out in dividends — comfortable. A ratio of 1× is a knife-edge.
Two flavors are useful: - **Earnings coverage** — net income divided by dividends. Vulnerable to one-off accounting items. - **Free cash flow coverage** — FCF divided by dividends. More honest for capital-intensive businesses where reported earnings and actual cash diverge.
For a stress check, look at the FCF version through the last recession or two — companies that maintained 1.5× through a downturn rarely cut. Companies that ran at 1.1× usually do.
Evibe surfaces both alongside payout ratio so you can spot dividends that look fine on the headline number but are fragile underneath.