RE:RE:RE:RE:RE:RE:GH trading at 11.2% Free Cash Flow yield - Nobody knowsTheBridge wrote: Malx1, the Kas definitely sounds like my kind of guy! Glad he's a shareholder.
Yes, that Mr Kasking character.
Heck of a shareholder, heck of a good guy.
You won't beat him at poker, and you won't get his GH shares cheaply.
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Speaking of Free Cash Flow yields......
Wanted to provide a quick example of what that means to investors...
When Kasking and me have a Wheat Farm, after we've paid all the workers, sold all the crop (forward, at predetermined grain prices), after we've bought a new harvester and a second grain silo; the money we have left over after all that, that's our "Free Cash Flow" for the year.
So with GH, after they've paid all their operating expenses, certain debt obligations, finished their renovations/expansions; we then have what's left at year's end, the Free Cash Flow.
Here's where it gets fun...................................
If GH's "2024" expected Free Cash Flow yield is 11.2%; that means when you own $10k worth of shares, then your $10k investment yields 11.2%. That's
your Free Cash Flow.
At year's end, your $10k stake in GH has generated $1,120 of "Free Cash Flow".
That's your stake, that's your cut, your capital at work.
So this is where management and BOD comes in. They look at that Free Cash Flow and they decide how best to put it to work.
The choices being:
1. Investments
2. Debt repayment
3. Share Buybacks
4. Dividends
So everybody who has a quick (surface) glance at GH, they say WOW, this company pays a 4.97% dividend annually.
Great.
If they don't look under the hood of that sleepy PT Cruiser, they won't see its giant V8 engine.
In this case, prospective investors say that's a cute 4.97% annual dividend yield.
What they don't see is the full 11.2% FcF generation taking place.
So yes, the cash yield on our common stock is 4.97% per share.
But the total FcF yield is 11.2%, meaning there is surplus money at the end of the year, and that money is being allocated towards a combination of debt repayments, share buybacks, and regular renovations.
Summary:
(A.) GH generates
$23.2mm FcF
11.20% FcF yield
(B.) GH pays
$10.3mm Dividends
4.97% Dividends
The 11.20% FcF - 4.97% Dividend = Surplus of 6.23%
Formula: (A - B = C)
(C.) GH allocates the remainder
$12.9mm (good stuff that most onlookers are not aware of)
6.23% Capex/Debt/Ncib
That's where things are. Very few companies have this financial flexibility and strength, so instead they borrow more money or issue more shares to raise money in effort to cover their financial shortfalls.
When a business like GH has a lofty 11.2% FcF yield, good things happen.
This is why I keep repeating the 'Hurry up and Wait' mantra.
A bowl of gold coins is quietly growing each quarter.
When coin bowl becomes full, that's when the dividends are increased. You gotta wait for it.
Sit on your shares, get paid, let the execs do what's best with remaining capital.
When they are done with buybacks and retiring debt, they will have positioned "
ALL" shareholders for dividend increases. Everyone here participates equally on a one-for-one basis. 10 shares, 100 shares, 1,000 shares all represent equal ownership in the business on a per-share basis. What's good for the 1,000 share owner is equally good for the 100 share owner. It's all the same.
You vote with your dollars.
Some like GH and buy $10k worth, others might buy $100k worth, a mutual fund may buy $10mm worth.
None of the above matters, because this business as a whole produces results on a per-share basis.
My 100 shares pays 4.97% cash yield.
Kasking's 1,000 shares pays 4.97% cash yield.
Bridge's 10,000 shares pays 4.97% cash yield.
Same Free Cash Flow yields, same dividend yield, same results per-share.
Everything settles out the same for everyone here.
There you have it, the Alberta-linked GIC.
Put them in the TFSA and leave them alone.
No feeding, watering or walking required; just patience and time.
After 221 hands of poker, you'll probably be dealt a pair of something.
If you find yourself holding two Kings, look across the table, Kasking probably got two Aces.