How important are dividends and free cash flow in such an uncertain climate?
Companies that are inexpensively priced, that have high returns on capital, that are conservatively financed, and that are able to generate cash are likely to outperform. The ability to pay, and even increase dividends also seems valuable to us in both inflation and deflation scenarios. Thus we believe that the “tangibility” of dividends from companies generating stable cash flow will become more important. We should expect the market to be more discerning among stocks—quality and valuation should be increasingly important. Free cash flow’s importance should also increase for this reason. Perhaps not for a long time has the continuing generation of free cash been more valuable. You have an extensive background in accounting, and Royce Special Equity Fund combines classic value analysis with accounting cynicism. How does this perspective serve your investment process and the Fund? A deep understanding of accounting principles gives me a chance to get at the veracity of a company’s finan
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- What is the correct definition of Free Cash Flow and is it useful to compare a companys performance from one year to the next, on the basis of Free Cash Flow and the way it changes?
- How do companies pay DIVIDENDS if their Levered Free Cash Flow is a NEGATIVE NUMBER PLEASE HELP?
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