Actual vs Potential Dividends
Originally published: 20/06/2016 14:00
Publication number: ELQ-91661-1
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Actual vs Potential Dividends

Compares the dividends paid to what a firm could have paid, by estimating the free cash flow to equity

With this excel model, you can:

1. To compare how much a firm has returned to its stockholder historically (up to 10 years) with how much it could have returned.
2. To provide an assessment of project quality (ROE compared to cost of equity) and stock price performance over the period.
3. To provide forecasts of how much cash the firm will have available for stock buybacks in the future

Free Cash Flow to Equity = the cash flow left over after net debt payments, net capital expenditures and working capital investments

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (

This Best Practice includes
1 Excel Model Slide

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Further information

The objective of this model is to get the following output values:

Historical Analysis
1. FCFE and Cash Returned each year for the historical period
2. Returns on equity, the stock and your required return each year for the historical period
3. Averages of both over the entire period
1. Forecasted FCFE for next 5 years
2. Forecasted dividends for next 5 years
3. Cash available each year for stock buybacks for next 5 years.

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