Coverage Ratio
The Coverage Ratio is a metric that measures how safely a dividend-paying stock can sustain its current payout. Prospyr uses it as a core dividend and DRIP health signal: the stronger the ratio, the more buffer the holding has before a payout, price move, or reinvestment threshold becomes a problem.
How Prospyr uses it
The Coverage Ratio System categorizes holdings into four tiers: Fortress (Green), a very safe dividend with significant buffer above minimum; Defended (Yellow-Green), a solid dividend with adequate buffer; At Risk (Yellow), where the dividend may be vulnerable if circumstances change; and Broken (Red), where the dividend is at risk of suspension or cut. 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
ENB (Enbridge) with strong cash flow would be treated as a Fortress-rated holding when its payout has a meaningful buffer above the minimum threshold.
Why this matters for Canadian investors
Coverage Ratio monitoring matters more in Canada than in markets with fractional DRIP support. A ratio that slips below 1.00 stops reinvestment entirely — not gradually. Monitoring the ratio before it breaks gives you the window to add shares and restore the buffer before a dividend cycle is missed. A missed reinvestment cycle is not recovered: the shares that would have been purchased simply are not purchased.