Glossary
What is FCF cover?
Definition
FCF cover is free cash flow for a period divided by the dividends paid in that period, shown as a multiple. This dividend coverage ratio sets the cash generated after capital expenditure against the cash paid out as dividends. For example, PepsiCo's FCF cover for FY2025 (ended 27 Dec 2025) was 1.0×, our calculation from its Form 10-K.
Formula
FCF cover = Free cash flow ÷ |Dividends paid|
FCF cover, a dividend coverage ratio, divides free cash flow by dividends paid and shows the result as a multiple. Both inputs come from the cash flow statement for the same period. Free cash flow is cash from operations minus capital expenditure, both as reported.
Dividends are earnings a company distributes to its shareholders instead of retaining them.[1] Dividends paid is the cash spent on them in the period, which our table shows with a minus sign. The formula uses the amount without that sign, which is what the bars around dividends paid mean. A cover below one means dividends paid were larger than free cash flow in that period.
Worked example: PepsiCo
This example calculates FCF cover from PepsiCo's cash flow statement for its latest fiscal year, from its Form 10-K. Free cash flow is our calculation from that statement, so it carries the D marker (derived by StockFactsheet). Dividends paid is the line PepsiCo prints as cash dividends paid, in its financing activities.
To get the cover, divide free cash flow by dividends paid without its minus sign. FCF cover itself sits in our per-share and dividends table and, like every ratio we calculate, carries no D marker. How to read a 10-K shows PepsiCo's financing activities as one total from the same statement.
| USD m | FY2025ended |
|---|---|
| Free cash flow | 7,672 D |
| Dividends paid | −7,638 |
| FCF cover (×) | 1.0× |
Source: PepsiCo Form 10-K for FY2025, SEC EDGAR
- D Free cash flow = cash from operations minus capital expenditure.
Totals may not add up because of rounding.
All periods: PepsiCo per-share data
How StockFactsheet calculates it
StockFactsheet calculates FCF cover for each fiscal year from our free cash flow and the dividends paid line as reported. There is no quarterly or trailing 12 months (TTM) FCF cover. FCF cover is n/m (not meaningful) when dividends paid are zero or free cash flow is zero or negative. When a filing has no dividends paid line, that year has no figure, not n/m.
SEC staff guidance on non-GAAP measures says many companies have mandatory debt service requirements or other non-discretionary expenditures that a free cash flow measure does not deduct.[2] Paying back a loan is a use of cash in financing activities,[1] so FCF cover, which divides free cash flow by dividends paid, sets dividends against cash before any debt repayments. Share buybacks are not in the formula either, although they also return cash to shareholders. The full rule is in our methodology for FCF cover.
Common mistakes
- Comparing FCF cover with a dividend cover based on earnings as if they matched: earnings include non-cash items, so a cover built on net income can differ from ours.
- Using dividends declared for a year instead of dividends paid in it: a dividend declared near a year end can be paid in the next year.
- Reading one year's FCF cover as typical: one-off payments and changes in capital expenditure move free cash flow, so one year can differ from the years around it.
- Reading FCF cover as a verdict on the dividend: it compares two cash amounts for one period and says nothing on its own about future dividends.
Sources and data
The references explain the term; the worked example's figures are as reported in the filings after them. Derived figures are our calculations (see Methodology).
(opens in new tab)- [1] Reference Beginners' Guide to Financial Statements
- [2] Reference Non-GAAP Financial Measures
- [3] Filing Form 10-K, fiscal year ended 27 Dec 2025
- [4] Our dataset StockFactsheet fundamentals dataset, extracted from SEC EDGAR XBRL on ; derived values (Q4, TTM, free cash flow, net debt, margins, growth rates and ratios) are explained in Methodology.
Cite this page
StockFactsheet (2026). "What is FCF cover?" Signed off by OffScriptBySami. Updated ; data as of . https://stockfactsheet.com/learn/fcf-cover/
For information only. StockFactsheet does not recommend buying, selling or holding any security. Figures can contain errors; always check the original filings. Full disclaimer
Update history
- Published First published version.