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Cash Flow Investor

 
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  • Coca-Cola: $49 Price Target And 3.2% Yield? Yes, Please [View article]
    Great article. While I note that with the recent dividend raise, the payout ratio is now toward the high end, I agree that KO is a great long-term buy and is being offered at a very attractive yield now.
    Mar 6 07:12 AM | 2 Likes Like |Link to Comment
  • Are You Using The Right Payout Ratio? [View article]
    Derek,

    Thanks very much for your comments. The calculations above -- and the calculation I usually use as a first estimate of a company's ability to cover its dividend -- use unlevered cash flow. Assuming a company passes that initial test, I then look more closely at the possible uses of the free cash flow to cover financing activities, including debt payments, share repurchases and dividend payments. While debt payments "must" be covered, they can sometimes fluctuate greatly due to principal being repaid or rolled into better credit facilities, so I'd rather make adjustments on a case-by-case basis than go straight to levered cash flow. As for whether the company will choose to continue share repurchases or pull back on its dividend if cash gets tight, I consider the company's history and apparent commitment to maintaining the dividend. Hope that helps to explain.
    Jul 24 06:25 AM | 2 Likes Like |Link to Comment
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