When a company’s stock pays an enticing dividend yield,
always make sure that it’s supported by free cash flow. Dividends not supported
by free cash flow would need to come from external financing such as a stock
sale or debt financing. This could prove detrimental to your publicly traded
businesses over the long-term. I prefer to see companies pay out less than 50%
of their free cash flow and retain the rest for other purposes.
Wednesday, July 6, 2016
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