Yes and no. Free cash paid out in dividends is free cash not invested back in the company. Presumably free cash invested in the company could help the company grow to produce even more free cash in subsequent years.
If you measure only the average growth in free cash for the trailing ten years, you're ignoring whether the company pays out dividends. You only measure how much free cash it generates. Dividends are irrelevant to the free cash growth rate.
If you measure something like a return on invested capital, you measure how much actual cash the business reinvests in itself and how effective it is at free cash growth from that reinvestment. That metric does account for dividends, because money paid out in dividends or used to buy back stock is obviously no longer available for reinvestment.
edit With that said, some investors value regular and reliable dividends more highly than the fluctuations of the market's semi-random valuation of a stock at any point in time. If you're confident that Coca-Cola will always pay, for example, 4% of what you paid for a share in dividends every year, that stability might be worth something to you.
That's psychology and harder to measure and predict than numbers from financial reports filed with the SEC. You might get some interesting data if you calculate the time value of that money--is KO more valuable because you can get $0.13 per share quarterly in dividends starting now rather than holding onto it for up to ten years to make even more money? That's the kind of decision individual investors have to make for themselves.
I treat dividends as bonuses rather than expectations, but that's my own investment philosophy.
If you measure only the average growth in free cash for the trailing ten years, you're ignoring whether the company pays out dividends. You only measure how much free cash it generates. Dividends are irrelevant to the free cash growth rate.
If you measure something like a return on invested capital, you measure how much actual cash the business reinvests in itself and how effective it is at free cash growth from that reinvestment. That metric does account for dividends, because money paid out in dividends or used to buy back stock is obviously no longer available for reinvestment.
edit With that said, some investors value regular and reliable dividends more highly than the fluctuations of the market's semi-random valuation of a stock at any point in time. If you're confident that Coca-Cola will always pay, for example, 4% of what you paid for a share in dividends every year, that stability might be worth something to you.
That's psychology and harder to measure and predict than numbers from financial reports filed with the SEC. You might get some interesting data if you calculate the time value of that money--is KO more valuable because you can get $0.13 per share quarterly in dividends starting now rather than holding onto it for up to ten years to make even more money? That's the kind of decision individual investors have to make for themselves.
I treat dividends as bonuses rather than expectations, but that's my own investment philosophy.