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Ferrellgas Partners LP Message Board

  • chatmo chatmo Jan 7, 2002 10:29 PM Flag

    help please

    being very new to investig a friend who works for fgp told me to look into this stock. my question is how does a company make 1.67 a share and pay out 2.oo a share divedind

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    • A company can pay dividends of 2.00 even it has net earnings of only 1.67 because it may have other sources of cash. It is tedious to study the annual report, but by doing so you can learn how the company's cash flow works.

      For instance, depreciation taken by the company is recorded as a charge against income, even though no money is paid for this charge. So, on the balance sheets, the company subtracts the cost of depreciation from it earnings. However, the "cash" represented by this depreciation still remains available to the company and could for instance go toward dividend payment.

      Look in the annual report for an item called "funds available for distribution" or some such. It is generally a number higher than the amount of the dividend.

      Hope this helps.

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