Free cash flow per share

Many investors seek firms that are good dividend-payers. But what makes a firm a reliable bet? One of the keys to assessing dividend strength is cash flow.

Free cash flow per share takes the annual cash flow available to pay dividends and divides by the number of ordinary shares in issue. Free cash flow is operating cash flow after non-discretionary items, such as bank interest and tax have been deducted (a deduction for essential capital expenditure may also be made).

In theory, that leaves the cash available to pay dividends – the higher the better. In practice, the directors will have a dividend policy, but the higher a firm’s free cash flow, the more likely it is the directors will hit dividend targets.

• See Tim Bennett’s video tutorial: Five ways companies can cook cash flow.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12