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Strategies & Market Trends : Value Investing

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petal

Sisyphus

To: petal who wrote (65016)	10/1/2020 7:37:32 PM
From: E_K_S	2 Recommendations of 78778

Re: FCF For dividend payers I look at FCF and payout ratio especially if there are one time write downs. CVX took some write downs so earnings were so low that it did not even cover their dividend (several quarters). But they generated more than enough FCF to cover their dividend. I would look at payout ratio per share of FCF (div/FCF per share). Also use a similar way to analyze REIT dividends; AFFO Adjusted Funds From Operations and or FFO (Funds From Operation) as the depreciation expense is not included in these numbers. REITs typically report FFO per share and/or AFFO per share for this reason. So it is important to look at FCF/share especially if the company is going through a restructuring (writing down Goodwill) and/or consolidating an acquisition. Many times if/when there is a value proposition, there are company specific problems that must be solved by management. That typically requires write downs and restructuring (could include layoff). That usually results in a hit to earnings for a few quarters. This is when you also look at their FCF. EKS

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