Dividend capacity

Dividend capacity is more than reported profit. Assess cash generation, capital expenditure, working capital, debt service, financing policy and necessary liquidity, alongside lawful distributable resources and contractual restrictions. For a multinational, consider whether subsidiary funds can actually be remitted, withholding taxes, exchange controls and transfer timing. Free cash flow to equity can inform the analysis but does not by itself establish that a distribution is legally permitted or strategically sensible. A stable dividend may require a buffer because one year's cash surplus need not recur.