AMP123

Markets Punish Dividend Cutters

It's interesting to look at free cash flow (FCF) and payout ratios for these companies over the last three years. When FCF is declining y-o-y and the payout ratios is over 50%, It sure looks like a clear warning sign that dividends may be cut, or at least flat.

While this suggest setting screening criteria to filter for the above, further analysis is needed. It would be interesting to backtest FCF and payout over the last 10 years to determine if there really is correlation to subsequent dividend cuts.