FAQ: What Is the Difference Between the Raw Unadjusted Dividend Cushion Ratio and the Adjusted Dividend Cushion Ratio?

FAQ: What Is the Difference Between the Raw Unadjusted Dividend Cushion Ratio and the Adjusted Dividend Cushion Ratio? 

A number of quarters ago, we rolled out additional transparency with respect to the Dividend Cushion ratio methodology for master limited partnership (MLP) and real estate investment trusts (REIT) we cover in order to help readers understand how much of the adjusted Dividend Cushion ratio is supported by external capital-market assistance. 

Both the adjusted and unadjusted ratios are worth keeping a close eye on. For example, should an MLP and/or a REIT have ongoing access to the capital markets, its highly probable that its dividend/distribution will be supported, as revealed by an adjusted Dividend Cushion ratio that would be comfortably north of 1. The ratio would include future expected capital market issuance in the numerator. 

On the other hand, if an MLP or REIT is unable to raise sufficient capital from the external markets, the dividend/distribution would have heightened risks, as revealed by a raw, unadjusted Dividend Cushion ratio significantly below 1. The raw unadjusted ratio would not include external capital market issuance in the numerator. 

Both ratios are updated at least quarterly for each MLP and REIT under coverage.