Coverage Ratio
The Coverage Ratio is the ratio of dividend income generated per cycle to the dividend expense required to purchase one additional share through DRIP reinvestment. A Coverage Ratio of 1.15 means your dividend income is 15% above the reinvestment threshold — a healthy buffer. A ratio below 1.00 means dividends no longer cover the cost of reinvestment and the DRIP has broken. It is Prospyr’s core DRIP health metric.
How Prospyr uses it
The Coverage Ratio System is coming in Phase 2. It will auto-calculate the Coverage Ratio for every holding in your connected portfolio and assign a status: Fortress (≥1.15), Defended (≥1.10), At Risk (<1.10), or Broken (<1.00). Every other Phase 2 feature — the Income Forecast Engine, Price Creep Alert System, and Personalized Strategy Score — references the Coverage Ratio as its primary input. You can explore your buffer level today using the DRIP Engine Simulator, which outputs your current buffer and break point for a single holding.
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.