Tabular Results and Interpretation. The table below shows the results for Ford to FYE 12/31/18, Honda to FYE 3/31/19 and Tata Motors to FYE 3/31/19, followed by a quick interpretation of each category of analysis:
Dividend Coverage: The coverage variable applied is net free cash flow NFCF (as a percentage of annual company revenues). Positive (negative) values suggest enough (inadequate) cushion to cover dividends. A figure of zero suggests breakeven coverage.
Deviations (NFCF, Revenue Growth*; latest FY vs. prior): Negative values suggest a recent (1-year) worsening. Negative values suggest that the latest fiscal year’s value has moved away from the prior period central tendency. * Zero or near-zero values suggest that the latest values are in line with historical.
Shifting Centrality (NFCF, Revenue Growth; 3-year): Here the baseline for a shift is not zero, but 1 and smaller values suggest secular deterioration. This category identifies any shift of each company’s own “core” performance (i.e. its own central tendency*) over the latest 3 years.
Coverage 2 (Dividends+Debt Service DDS): Positive (negative) values suggest an adequate (inadequate) cushion to cover DDS. Just as in Dividend Coverage (Coverage 1) above, the coverage variable is net free cash flow/revenues. Debt service, which is the sum of both principal and interest payments, is now added together with dividends; this combined figure may be abbreviated DDS or d+.
(*) Notes: Revenue growth is year on year (YoY) percentage change. The basis for this analysis is spatial, where the central tendency may also be referred to as “spatial centrality” or simply centrality.
For methodological and other details refer to the separate post titled Dividend Coverage Roundup: Background Notes referenced in the Author’s page.
Comparative Overview in Charts
The following charts display the data from the table above. Note that spatial centrality is also shown either by a zero (for Charts 1, 2, 3 and 6), or the figure 1 (for Charts 4 and 5).
Chart 1. Dividend Coverage. Ford has positive dividend coverage (shown as a column). HMC and TTM are blank because their dividends are negligible or zero. For coverage of dividends and debt service together, see Chart 6.
NFCF. In the most recent fiscal year, net free cash flow NFCF has roughly been within a central range for F and HMC, while TTM has diverged significantly from its prior centrality.
REVG. As of the most recent fiscal year, all firms show declines in revenue growth to varying degrees.
NFCF. Over a 3-year period to the most recent fiscal year, net free cash flow is roughly within range of its centrality (note that the finer scale makes the divergence look greater).
REVG. Over the latest 3-year period, F and HMC have roughly maintained within their core of revenue growth, while TTM has shifted downwards.
A more comprehensive analysis of coverage requires examination of debt service, detailed in this section. Debt Service is the sum of principal and interest on debt obligations. Adding debt service onto dividends may result in significantly different conclusions about dividend coverage capacity since both compete for limited company funds, with debt service typically being contractual. The chart below shows the relative performance of the firms when coverage is estimated for dividends and debt service combined; the centrality is represented by zero. All firms appear to fall considerably short in coverage capacity; of the three firms, F diverges the furthest downward from its core coverage capacity.
Methodology and other details are consolidated in a separate post titled Dividend Coverage Roundup: Background Notes, searchable or referenced in the Author’s page. A default assumption of fat tails is generally made in favor of higher-ranking distributions for reasons detailed in the methodology. Financial Visualizations. For selected 3D stylized and other sketches of underlying theoretical models of selected companies, see the author’s page for links; given the qualifications and shortcomings, at the very least it is hoped that such models might be appreciated for their aesthetic value.
The author may also hold positions in securities of companies, including through ETFs, that are covered herein. The discussion and any visuals may contain significant errors, are subject to revisions and are provided 'as is' solely for informational purposes, not for trading or investment advice. This preliminary analysis is exploratory; no claims are made as to the validity of data, assumptions, theoretical models and methodologies; results may be based on prior data that do not reflect the most current market events.