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My entire career has been spent in industry within the finance and accounting realm. My career started in 1985 and has included exposure to implementing SFASs
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  • 10 Stocks With A Strong Cash To Dividend Coverage 1 comment
    Jul 20, 2011 7:28 AM | about stocks: INTC, MSFT, CINF, COP, WMT, LOW, LMT, JNJ, AFL, WBA

    Dividends are not paid with sales, earnings, EPS, EBIT or EBITDA. Instead dividends are paid with cash. As an investor, you want to pay close attention to the cash flow statement. Unfortunately, it is probably the least used and most misunderstood statement.

    Ultimately, cash flow is what drives the value of any financial asset. The reason analysts look at revenue, EPS, EBIT, EBITDA and margins, they are trying to estimate the level of cash the company will generate in the future.

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  • below72
    , contributor
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    Good article. Cash is king and the ability to generate cash flow is the critical component in analyzing a company's ability to pay/grow its dividend and service its debt.


    One caveat on your analysis regarding cash on the balance sheet....many of those companies have large cash balances in foreign subsidiaries which cannot be used to pay dividends unless the cash is repatriated to the US which would lead to significant taxes. So the true amount of cash to pay dividends is overstated in many of those companies.
    20 Jul 2011, 11:27 AM Reply Like
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