Dividend Cover by Free Cash Flow: formula and how to read it

How many times spare cash covers the dividend. Latest fiscal-year free cash flow divided by dividends paid. Below 1× means the dividend is not fully funded by free cash flow.

Stock Meadow groups it under Dividends, and shows it in tables as Div. cover (FCF).

Dividend cover = latest fiscal-year free cash flow ÷ dividends paid

A company with $120 million of free cash flow that paid $40 million in dividends has a cover of 3.0×. The numbers are made up for illustration.

A higher figure means a better-funded dividend. Below 1× means the dividend is not fully covered by free cash flow.

When Stock Meadow ranks stocks, a higher figure scores better.

• One year of free cash flow can be unusually high or low.
• Banks' cash flows swing widely, so their cover can look poor even when the dividend is safe.
• Blank when dividend or free cash flow figures are unavailable.

How Stock Meadow handles gaps. Usually blank when dividend or free cash flow figures aren't available.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Fixed-recipe models that score it: Income (dividends).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

• Dividend Payout Ratio: share of profit paid out; 25–65% is sustainable.
• Dividend Yield: yearly dividends as a share of the price.
• Price-to-Free-Cash-Flow (P/FCF): what you pay for each dollar of spare cash.

What does dividend cover below 1 mean?

The dividend was larger than the free cash flow that year, so the gap had to come from cash reserves or borrowing. A single year is not decisive, but a repeat is a warning sign.

Is a higher or lower Div. cover (FCF) better?

When Stock Meadow ranks stocks, a higher figure scores better. That is a ranking convention, so read Div. cover (FCF) alongside other measures and compare similar companies.

Why is Div. cover (FCF) blank for some stocks?

It is usually blank when dividend or free cash flow figures aren't available. Stock Meadow leaves the figure blank rather than guessing it.