The dividend yield relates a year's dividends to a company's market value. A dividend yield of 3% means that the dividends equal 3% of the market capitalization. Critivest uses the dividends the company actually paid in the last four quarters.
DividendYield > 0.02 and TotalDividendCashCoverage >= 1
How is the dividend yield calculated?
Dividend yield in Critivest = all dividends paid / market capitalization
Dividend yield is usually calculated per share: annual dividend per share divided by the share price. Critivest instead totals all dividends paid from the cash flow statement, including payments on preferred shares and to minority shareholders. The result can therefore differ from the dividend yield of an individual share.
Dividend coverage: how far does free cash flow cover the dividends?
Cash-flow-based dividend coverage = free cash flow / dividends paid
A value above 1 means that free cash flow exceeds the dividends. With identical amounts and periods, the inverse, dividends paid divided by free cash flow, is the cash-flow-based payout ratio. It shows the proportion of free cash flow paid out as dividends. The earnings-based payout ratio instead divides dividends by earnings.
Calculating the dividend yield: an example
For the fictional Example Company:
| Dividends paid in the last four quarters | EUR 0.9 billion |
|---|---|
| Market capitalization | EUR 30 billion |
| Dividend yield | 0.9 / 30 = 0.03, i.e. 3% |
| Free cash flow of the last four quarters | EUR 1.8 billion |
| Dividend coverage | 1.8 / 0.9 = 2 |
| Dividends to free cash flow | 0.9 / 1.8 = 0.5, i.e. 50% |
When is the dividend yield of little use?
Why does the dividend yield differ from other sources?
- Other sources often use the latest announced dividend per share or a forecast. Critivest uses dividends already paid. Announcing a cut or cancellation does not change the calculation immediately. Past payments remain until they fall outside the four quarters; the total then falls if no payment of the same size replaces them.
- Special dividends of the last four quarters count, as do dividends on preferred shares and to minority shareholders.
- If a company pays only once or twice a year, four quarters can contain one payment more or less when a payment date shifts.
Further limits of the dividend yield
- Share buybacks do not count as dividends, although they also return cash to shareholders.
- The dividend yield rises when the share price falls. A high value can therefore also reflect a falling price.
- It is based on past payments and does not say whether a company will pay dividends in the future. Dividend coverage only compares free cash flow with dividends over the period used.
- It is a yield before tax: taxes shareholders pay on dividends are not deducted.
Using the dividend yield as your own criterion
This condition is met if the dividend yield is above 2% and free cash flow at least covers the dividends. In conditions, write percentages as decimals, using a decimal point:
DividendYield > 0.02 and TotalDividendCashCoverage >= 1The Example Company meets it. You set the limits yourself; they are examples, not a recommendation.
Which data does Critivest use for the dividend yield?
The dividends paid come from the cash flow statement: the total of the last four quarters or, if four complete quarters are not available, that of the latest fiscal year. Critivest records them as a positive amount. Market capitalization is the most recently stored market value.
For the ratio DividendsToFreeCashFlow, dividends and free cash flow come from the same four quarters or
the same fiscal year (see common periods). This
ratio and dividend coverage can use different periods in Critivest, so they are not always reciprocals. If free
cash flow is zero or negative, the payout ratio is unavailable because it would not be meaningful.
Periods and missing values: Methodology.
Formula reference in Critivest
Name in conditions: DividendYield
DividendYield = DividendsPaid / MarketCapitalizationTotal dividends paid over the last four quarters divided by market capitalization, including preferred and noncontrolling interests
Name in conditions: TotalDividendCashCoverage
TotalDividendCashCoverage = FreeCashFlow / DividendsPaidFree cash flow divided by total dividends paid over the last four quarters, including preferred and noncontrolling interests
Name in conditions: DividendsToFreeCashFlow
DividendsToFreeCashFlow = CommonPeriodDividendsPaid / CommonPeriodFreeCashFlowTotal dividends paid divided by free cash flow of the last four quarters or fiscal year, including preferred and noncontrolling interests; a fraction (0.5 means 50%). Unavailable for zero or negative free cash flow, where it is not meaningful
Names used in conditions
DividendsPaid- Cash flow, last 4 quarters or fiscal year: Dividends paid (positive cash outflow)
MarketCapitalization- Market capitalization
FreeCashFlow- Operating cash flow minus capital expenditures over the last four quarters
CommonPeriodDividendsPaid- Dividends paid for the same year as earnings (last four quarters or fiscal year), as a positive cash outflow
CommonPeriodFreeCashFlow- Free cash flow for the same year as earnings (last four quarters or fiscal year); positive values only
Related formulas
- Free cash flow: Free cash flow is the operating cash flow less capital expenditures. Related metrics include the free cash flow yield and the price-to-free-cash-flow ratio.
- P/E ratio (price-to-earnings ratio): The P/E ratio divides a company's market value by its earnings. Critivest calculates it from the market capitalization and the earnings of the last four quarters.
Sources
- Dividend yield, ASIC Moneysmart: definition of dividend yield
- Analysis of Dividends and Share Repurchases, CFA Institute: earnings-based and cash-flow-based dividend coverage
Last updated: November 4, 2026