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Dividend Acid Test Formula

Wednesday, June 30, 2010 - 12:59 PM
I thought the title of TheStreet article, "7 Dow Dividend Stocks Safer Than T-Notes", was too questionable, but the article does have something useful for dividend stock investors to consider: the dividend acid test formula. Here's an excerpt from the article:
By ensuring that the stock's dividend yield is less than the liability-adjusted cash flow yield (LACFY), investors can be reasonably confident that an operational incident or upcoming debt maturity won't derail their dividend check. [...] This formula also demands that the LACFY be greater than the 10-year Treasury yield [...] Of the 30 stocks on the Dow Jones Industrial Average, only seven meet these criteria.

Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708