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£74k Portfolio to buy £8,000 FCF and £4,445 Dividends

 One of my key reasons to invest in a company is their ability to create free cash flow. At this time it's more important than ever. I do have some investments in companies that don't produce free cash flow (yet) such as Aminex, Eve Sleep and Independent Oil & Gas.

I'm just doing some analysis on the companies I invest in and thought I would share the findings. Two of the companies that I'm particularly interested in are Tullow Oil and Gulf Keystone Petroleum. Those links take you to my blog posts where I'm happy to share my research (with further evidence based links to company data)

Each company produces their data in a different way, using different ratios. One of my objectives for this blog post was to present companies side by side with a single % figure for their Free Cash Flow (FCF) divided into their marcap and a single % figure for their dividend divided into their marcap.

I've used last year's data for most of the following companies, but for the first two shown with an asterisk, I've used forward looking estimations that I've made based on known information and an oil price of $65 for the year.

For example GKP had a difficult year in 2020 (due to payment delays and lower oil price) and will likely report revenue of $101m tomorrow. According to my calculations they will produce an ongoing revenue of $249m which is the basis I've used for the table below. (This year GKP are expected to exceptionally gain an additional $70m in backpayments)

I thought it would be interesting to show how much I would need to invest to get £1000 of FCF in each share. Here's the table:


If I were to invest into each of these to generate total FCF of £8,000 it would cost me £74k. This would work out to be a 10.77% yield of FCF/Marcap. In terms of actual payout, all eight together should yield 5.98% in dividends this year (GKP will probably annouce their's tomorrow, but 12.9% is last year's dividends). Tullow don't pay a dividend at the moment as they are paying off debt.

I thought it would be interesting to present the data like this. This is not investment advice. I own shares in many of these companies. Please do your own research, I'm happy to share mine.


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