Liquid Undervalued Dividend Stocks

Posted by D4L | Thursday, May 17, 2012 | | 0 comments »

Dividend stocks can be a great way to supplement your income, but what if the company goes bankrupt? One way to to ensure a company can sustain payouts is to check their current ratio. The current ratio is a liquidity ratio that measures a company’s ability to pay short-term debts (or dividends). If the ratio is high, then they can easily pay their liabilities. If the ratio is low (under 1) they don’t necessarily have the ability to pay their debts.

Levered Free Cash Flow is a calculation of the amount of cash that a company holds after it has paid taxes, repayments on its debts, and any expenditures to maintain or expand business (Capital Expenditure or CapEx). In other words, levered free cash flow is the money that the business can use to grow and pay dividends to shareholders. The levered free cash flow to enterprise value ratio (LFCF/EV) is one method of measuring the value of a company. The more free cash a company has relative to its enterprise value (a high ratio), the cheaper the company appears.

Source: Kapitall

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