Cash flow to stockholders is a financial metric that measures the net cash flow a company pays to its stockholders (i.e. shareholders) during a given period. It is also known as cash flow to equity.
The cash flow to stockholders is calculated by subtracting a company’s dividend payments to its stockholders from its net income and adding any net proceeds from the issuance of new stock. The resulting figure reflects the net cash flow paid to stockholders during the period.
The formula for calculating cash flow to stockholders is as follows:
Cash Flow to Stockholders = Net Income – Dividend Payments to Stockholders + Net Proceeds from Issuance of New Stock
Dividend payments to stockholders include any cash payments made to shareholders as dividends. Net proceeds from the issuance of new stock include any cash received from the sale of new shares of stock, less any associated costs.
A positive cash flow to stockholders indicates that a company is generating more cash from its operations than it is paying out to its shareholders in the form of dividends. This is generally a positive sign, as it suggests that the company may be able to increase its dividend payments or reinvest the excess cash back into the business. A negative cash flow to stockholders indicates that a company is paying out more in dividends than it is generating from its operations, which may suggest that the company is facing financial difficulties or is not generating enough cash flow to support its dividend payments.