Coverage Ratio
The Coverage Ratio, or DRIP Share Coverage, measures whether the dividend income generated in one payment cycle can fund the number of shares required for DRIP reinvestment. Prospyr calculates it as APR ÷ TPR — practically, (income per payment ÷ current share price) ÷ shares needed to DRIP. A ratio of 1.00 means the payment can exactly fund the required share purchase at the current inputs.
How Prospyr uses it
Prospyr assigns each holding one of four DRIP Share Coverage statuses: Fortress at a ratio of 1.15 or higher; Defended at 1.10 or higher but below 1.15; At Risk at 1.00 or higher but below 1.10; and Broken below 1.00. These statuses describe DRIP Share Coverage — not whether the company can sustain or cut its dividend. A higher ratio means a greater margin above the modeled reinvestment requirement at the current income, price, and TPR inputs. You can explore your current buffer level using the DRIP Engine Simulator, which outputs your current buffer and break point for a single holding.
Example
Suppose a holding generates $115 of income per payment, the current share price is $100, and 1 share is needed to DRIP:
($115 ÷ $100) ÷ 1 = 1.15 → Fortress
If the same $115 payment meets a $110 share price instead:
($115 ÷ $110) ÷ 1 ≈ 1.045 → At Risk
The status changed because the DRIP share-purchase coverage changed — not because Prospyr made a judgment about dividend safety.
Why this matters for Canadian investors
For a whole-share DRIP setup, the 1.00 boundary is meaningful because a ratio below 1.00 means the modeled dividend payment no longer covers the required share purchase at the current inputs. Monitoring Coverage Ratio helps show when price movement, dividend amount, share count, or the required TPR changes the reinvestment margin. It is a DRIP mechanics signal, not a dividend-safety rating.