Is a Dividend Safe? Free Cash Flow Test
Same year, two payout ratios: earnings basis against cash basis (illustrative, percent)ranking ·
2026-08-07 · 2×2
Illustrative year: the reconciliation behind the coverage test (hypothetical manufacturer, $ millions)ranking ·
2026-08-07 · 6×2
Same year, two payout ratios: earnings basis against cash basis (illustrative, percent)
Same year, two payout ratios: earnings basis against cash basis (illustrative, percent)
| ratio_basis | payout_pct |
|---|---|
| Dividends over net income | 80 |
| Dividends over free cash flow | 213 |
the exact SQL behind every number
SELECT
ratio_basis,
ROUND(100.0 * dividends_usd_mm / denominator_usd_mm) AS payout_pct
FROM
(
SELECT 'Dividends over net income' AS ratio_basis, 320 AS dividends_usd_mm, 400 AS denominator_usd_mm, 1 AS ratio_order
UNION ALL
SELECT 'Dividends over free cash flow', 320, 600 - 450, 2
)
ORDER BY ratio_order
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