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Family Dollar Stores Inc (NYSE:FDO)
Free Cash Flow
\$176 Mil (TTM As of May. 2015)

Family Dollar Stores Inc's total free cash flow for the three months ended in May. 2015 was \$163 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in May. 2015 was \$176 Mil.

Family Dollar Stores Inc's free cash flow per share for the three months ended in May. 2015 was \$1.42. Its free cash flow per share for the trailing twelve months (TTM) ended in May. 2015 was \$1.53.

During the past 3 years, the average Free Cash Flow per Share Growth Rate was -41.80% per year. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the Free Cash Flow Growth Rate using free cash flow per share data.

During the past 13 years, Family Dollar Stores Inc's highest 3-Year average Free Cash Flow per Share Growth Rate was 258.30% per year. The lowest was -69.00% per year. And the median was 16.80% per year.

Definition

Free Cash Flow is considered one of the most important parameters to measure a companys earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA). However, when we look at the Free Cash Flow, we should look from a long term perspective, because any years Free Cash Flow can be drastically affected by the spending on Property, Plant, & Equipment (PPE) of the business in that year. Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.

Note: GuruFocus does not calculate Free Cash Flow when Cash Flow for Capital Expenditures is 0.

Family Dollar Stores Inc's Free Cash Flow for the fiscal year that ended in Aug. 2014 is calculated as

 Free Cash Flow (A: Aug. 2014 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 469.162 + -436.288 = 33

Family Dollar Stores Inc's Free Cash Flow for the quarter that ended in May. 2015 is calculated as

 Free Cash Flow (Q: May. 2015 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 239.837 + -77.263 = 163

Family Dollar Stores Inc Free Cash Flow for the trailing twelve months (TTM) ended in May. 2015 was 87.056 (Aug. 2014 ) + -196.614 (Nov. 2014 ) + 122.9 (Feb. 2015 ) + 162.574 (May. 2015 ) = \$176 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Explanation

Free Cash Flow is very close to Warren Buffetts definition of Owners Earnings, except that in Warren Buffetts Owners Earnings, the spending for Property, Plant, and Equipment is only for maintenance (replacement), while in the Free Cash Flow calculation, the cost of new Property, Plant, and Equipment due to business expansion is also deducted. There, Free Cash Flow is more conservative than Owners Earnings.

In Don Yacktmans calculation of forward rate of return, he uses Free Cash Flow for the calculation. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation.

This is what Yacktman said in his March 2012 interview - when the S&P 500 was at 1400:

If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. \$70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.

The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).

Therefore, as of May15, Family Dollar Stores Inc's Forward Rate of Return is

 Forward Rate of Return (May15) = Normalized Free Cash Flow / Price + Growth rate = -0.12761905 / 77.52 + 0.0271 = 2.55 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Be Aware

Free Cash Flow within a report period can be affected by management's decisions of capital spending. Therefore, it is important to look at long term when it comes to Free Cash Flow.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Family Dollar Stores Inc Annual Data

 Aug05 Aug06 Aug07 Aug08 Aug09 Aug10 Aug11 Aug12 Aug13 Aug14 Cash Flow from Operations 299 451 416 516 529 592 528 369 472 469 Cash Flow_CPEX -229 -192 -132 -168 -155 -212 -345 -603 -744 -436 total_freecashflow 70 259 284 348 374 379 183 -234 -272 33

Family Dollar Stores Inc Quarterly Data

 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Cash Flow from Operations 163 190 147 26 86 141 216 -93 196 240 Cash Flow_CPEX -213 -190 -145 -112 -107 -87 -129 -103 -73 -77 total_freecashflow -50 0 2 -86 -21 54 87 -197 123 163
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