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.
William Bias has been researching stocks since 1992 and has been a freelance writer since 2012. He employs a strategic business oriented approach to stock market investing.