Dividend Variables

This article explains Dividend variables in Model Reef.

You will learn:

Dividend variables represent cash distributions made to equity holders.

A Dividend variable captures:

Cash amounts paid out to shareholders or unit holders.
These can be entered directly or driven by rules such as a percentage of NPAT or equity.

Dividends do not appear as expenses in the P&L. They are distributions of equity, not operating costs.

In the Balance Sheet:

Dividends reduce Retained Earnings immediately when declared and paid.
They also reduce Cash by the amount distributed.
Model Reef does not track a separate dividends payable account by default; the impact is considered immediate.

This keeps the equity section aligned with the cumulative NPAT and dividends over time.

In the Cashflow Statement:

Dividends appear under Financing cash outflows.
They reduce the cash available to the business and to equity holders in subsequent periods.

In the Cash Waterfall:

Dividends are shown after free cashflow items.
They form part of the reconciliation between free cashflow to equity and changes in cash and equity.

This makes the relationship between operating performance, financing flows and equity distributions visible.

You can model dividends as:

Different scenarios can use different payout policies, for example:

Because each scenario is a separate model, you can safely explore different dividend policies without affecting the base case.

Dividends affect valuation by:

Reducing reinvested cash and therefore future growth capacity.
Providing explicit cash returns to equity holders that are captured in FCFE and IRR.
Influencing equity money multiple and payback.

Model Reef uses free cashflows to equity and terminal value to estimate equity value, with dividends forming a part of the cashflow stream.

Last updated 1 month ago

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