Free Cash Flow Yield

Without good cash flow even profitable companies can go bust. Free cash flow is the cash a company generates each year after paying all 'non discretionary' expenses (such as tax, interests on loans etc.). The free cash is then available for expanding the business, paying dividends and other such uses. The free cash flow yield is the annual free cash flow expressed as a percentage of the current market capitalisation of a company.

From an investor view point the FCF yield is a guide to the security of future dividend payments, so the higher the value the better.

As with all indicators and ratios, it should not be used in isolation, and should be compared with previous years as well as with other companies in the sector.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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