Dod101 wrote:simoan wrote:Dod101 wrote:I do not think that Simoan's concern about dividends not being covered by free cash flow is actually correct, at least not if you study and believe the remarks from the Chairman.
How dare you suggest the Chairman knows better than me!! And in the process insinuate that I don't check my facts! Perhaps some of the money to pay the dividend comes out of his piggy bank then? Here are the last 6 years per share Free cashflow and Dividend payments:Value | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | Total (ps)
FCF (ps) | 6.57 | 4.64 | 5.37 | 6.05 | 4.94 | 6.12 | 33.69
Dividend (ps) | 6.03 | 6.15 | 6.23 | 6.38 | 6.48 | 6.64 | 37.91
The data is from a reliable source, Refinitiv. So they have paid out 4.22p more than they have made in free cashlow. Basically, they keep asking shareholders for money and then give some of it back to them. What's the point of that?
All the best, Si
I assume that your comments do not need to be taken too seriously but certainly your numbers are not very encouraging. I am not familiar with such companies so find it difficult to find my way around. I guess they would say that whilst acknowledging these numbers,the free cash flow is at least to an extent in their control because it includes not just dividends paid up to them from operations, interest and repayment of loans etc as well as expenses such as capex and running costs. You could well be correct though in your summary that some of the funds raised are used to pay dividends and so you could say that the money is just circulating, and of course diluting those who do not participate, a pointless exercise as you say.
You don't need to understand what a company does - you can just treat it as a blackbox in a really simplistic way if you like i.e. equity and debt funding goes in, revenue is generated from business operations and out the other end comes cash. Free cashflow is what's left once all the bills have been paid. It can be used to pay down debt, buyback shares, fund acquisitions and pay dividends. IMHO it is exceptionally important and many private investors seem to pay very little attention to it.
All the best, Si