MB Capital Strategies Glossary — Updated June 2026
Cash flow is the actual cash moving in and out of a business — not accounting profits. For dividend investors, cash flow is the number that actually matters: dividends are paid from cash, not from reported earnings.
Operating Cash Flow (OCF) is cash generated from day-to-day operations — shipping freight, selling commodities, collecting rent (REITs). It's the most important operational health indicator.
Capital Expenditures (CapEx) are cash spent on maintaining or expanding the asset base: drydocking a tanker, building a new mine shaft, replacing pipelines. This cash is consumed, not earned.
Free Cash Flow (FCF) is what remains after CapEx — and it's what funds dividends, buybacks, and debt repayment.
Net earnings can be manipulated by depreciation, amortization, and accounting choices. Cash flow cannot. A shipping company with $200M in earnings but $250M in drydock CapEx has negative free cash flow — no dividend capacity regardless of the profit figure.
Cash flow margin = FCF ÷ Revenue. Mining companies typically target 20-35% FCF margins at mid-cycle commodity prices. REITs use FFO payout ratio (Funds From Operations) instead of FCF since real estate depreciation distorts standard cash flow.
A stock trading at FCF yield of 8-12% is typically cheap for a cyclical business with stable free cash. Below 3-4% is expensive. Many shipping stocks in 2022-2024 traded at 20-40% FCF yield at peak freight rates — signaling exceptional dividend capacity.
Shipping is a capital-intensive business with lumpy CapEx (vessel purchases/drydock). The key cash flow cycle: high freight rates → high OCF → dividends + potential fleet expansion → market normalizes → lower OCF → dividend resets. Understanding this cycle is essential for TCE Rate investing.
Free Cash Flow (FCF) · Payout Ratio · Dividend Yield · TCE Rate · Capital Expenditure (CapEx) · EBITDA
About Marco Bozem · Full Glossary · Best Tanker Stocks 2026
Marco Bozem
Investor & Analyst | Hard Assets, Dividends, Shipping | MB Capital Strategies
Marco analyzes commodity and dividend stocks with focus on Shipping, Mining, and Energy. All analysis is based on publicly available reports and personal judgment. Not investment advice.