Debt Levels

Debt Levels

Debt levels can significantly impact a company’s financial stability and its ability to pay dividends.

Debt-to-Equity Ratio

The debt-to-equity ratio measures a company’s financial leverage and indicates the proportion 관련주 of debt used to finance its assets relative to equity.

A lower debt-to-equity ratio suggests a more conservative capital structure, which can be beneficial for dividend sustainability.

Debt-to-Equity Ratio=Total DebtTotal Equity\text{Debt-to-Equity Ratio} = \frac{\text{Total Debt}}{\text{Total Equity}}

  1. Example: A company with a total debt of $500 million and a total equity of $1 billion has a debt-to-equity ratio of 0.5, indicating moderate leverage.

Interest Coverage Ratio

The interest coverage ratio measures a company’s ability to meet its interest obligations from its earnings. A higher ratio indicates that a company can comfortably cover its interest payments, reducing the risk of financial distress.

Interest Coverage Ratio=Earnings Before Interest and Taxes (EBIT)Interest Expense\text{Interest Coverage Ratio} = \frac{\text{Earnings Before Interest and Taxes (EBIT)}}{\text{Interest Expense}}

  1. Example: A company with an EBIT of $300 million and interest expenses of $50 million has an interest coverage ratio of 6, indicating strong earnings relative to its debt obligations.

Payout Ratio

The payout ratio indicates the proportion of earnings paid out as dividends. A sustainable payout ratio balances returning profits to shareholders with retaining earnings for growth and stability.