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  • Cramer's Lightning Round - Trinity Missed the Train (3/24/09) [View article]
    AJ,

    If a company's earnings have recently taken a hit, they may no longer have enough cash to pay the current dividend. Freeport McMoRan had a sharp reduction in sales and earnings last quarter, so they suspended their dividend ($0.00) in order to protect what cash they still had.

    A rule of thumb: If the most recent earnings per share are at least twice the dividend, an argument could be made that the company will continue to be able to pay the current dividend.

    However, it might be better to look at free cash flow and accumulated cash than to look at earnings.
    Apr 01 19:26 pm |Rating: 0 0 |Link to Comment
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