warning signs for potential dividend cuts and made notes.
- Soaring yield often due to share price collapse
If you're using a soaring yield as a sign, you're too late anyway. The main things I watch out for are shrinking operating margins and the total coverage of interest and dividend
- Management dropping clue in comments in quarterly statements, conference calls etc on their dividend policy, payout ratio and/or dividend growth outlook
- Company stops raising the dividend
- Declining revenues, earnings and cash flows
- Payout ratio shoots up and is then sustained at this higher level
- Change in interest coverage (earnings before interest and taxes (EBIT) divided by interest expense), as well as debt-to-equity versus peers.
- Making acquisitions when sales and cash flow are barely moving versus industry peers
Debt Ratios are key indicators
Higher interest rates. Choosing between cutting capex/limiting capex or maintaining the dividend. Disruption in the industry or change of direction for the company, ie. TCL going from a printer to a packager.
