CVA - Covanta: Very High Leverage Means A Slow Road Back For The Dividend
Introduction
Several weeks ago, Covanta (CVA) disappointed their shareholders by reducing their dividend by a very large 68%. Even though this painful action has already transpired, through analyzing their situation it is still possible to provide insights into any early warning signs that can be applied to other investments as well as estimating an approximate timeline for them to reinstate their dividends.
Distribution Coverage
When assessing distribution coverage, I prefer to forgo using earnings per share and use free cash flow instead, since distributions are paid from cash and not from “earnings”. The