Comments on: Dividend Payout vs. Free Cash Flow Payout *

By: D4L

D4L — Sun, 19 Dec 2010 20:13:31 +0000

Zach: Actually, operating cash flow has already taken depreciation into account. Thus, FCF = Cash from Operations – Capital Expenditures.

Best Wishes,
D4L

By: Zach

Zach — Sun, 19 Dec 2010 18:59:34 +0000

D4L: excellent article, thank you for the knowledge share. I never really understood the traditional Dividend Payout metric, I allows wanted to know how much cash does the company have and how much of that cash did it pay in dividends. Leads me to my question, how do you handle deprecation? On a cash flow statement, Depreciation isn’t real cash, correct? Just the accounting of the capital expenditures from previous quarters? Wouldn’t a better equation be:

FCF = Cash from Operations – depreciation – Capital Expenditures

If so, how do you explain AT&T? If you take out their depreciation, they have negative cash flow.

FCF (AT&T FY2009)= 34.4 Net Operating – 19.7 Dep – 16.5 CapEx = ($1.8) [before dividend payment]

By: Money Hacks Carnival #87

Money Hacks Carnival #87 — Wed, 21 Oct 2009 11:38:45 +0000

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By: Dividends4Life

Dividends4Life — Thu, 15 Oct 2009 02:34:07 +0000

freecash flow: Looks like an interesting book. Thanks.

Best Wishes,
D4L

By: Dividends4Life

Dividends4Life — Thu, 15 Oct 2009 01:24:34 +0000

dizzy7: Thanks. I was always getting the question as to why I use FCF Payout. Now I can answer it by pointing to this post.

Best Wishes,
D4L

By: freecash flow

freecash flow — Wed, 14 Oct 2009 18:20:39 +0000

Also look at the book for some new view points:

http://www.amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=sr_1_5?ie=UTF8&s=books&qid=1255544204&sr=1-5

By: dizzy7

dizzy7 — Wed, 14 Oct 2009 16:11:56 +0000

Great job of explaining the difference between earnings, cash flow and free cash flow and their importance to dividend investors. I also found your inclusion of specific examples interesting and helpful. Thanks.