Cash flow to stockholders is the amount of cash that a company pays out to its shareholders. This amount is the cash dividends paid during a reporting period. Investors routinely compare the cash flow to stockholders to the total amount of cash flow generated by a business, to measure the potential for greater dividends in the future.
If dividends are paid in the form of additional stock or assets other than cash, this is not considered to be cash flow to investors.
An alternative approach to this measurement is to subtract from cash dividends any cash received from investors to buy additional shares from the company, and then add any cash paid to investors to repurchase their shares. This approach can result in a negative cash flow to stockholders figure. For example, a business pays out $40,000 in cash dividends, buys back $10,000 of shares from investors, and sells $70,000 of stock to investors. The result is negative cash flow to stockholders of $20,000.