Covered, lightly levered, regular dividend raised every year. Ferguson declared about $652 million of dividends against $1,603 million of free cash flow in fiscal 2025, net debt is 1.3 times EBITDA, and the regular quarterly rate rose to $0.89 in 2026. The yield clears the 1% line and every check passes, so the card is graded good. Specials are excluded from the yield and the history.
Key risk: Housing and repair demand: Ferguson's cash flow follows residential construction and renovation, which turn before the dividend does.
Changes if: Free cash flow payout rises above 60%, or net debt/EBITDA crosses 3x.
- ✓Cash-flow cover 40.7% of FY2025 free cash flow, pass (<60%), on dividends declared.
- ✓Leverage About 1.3x on reconstructed EBITDA, pass (<3x).
- ✓Dividend history Regular quarterly rate $0.75 in 2023, $0.79 in 2024, $0.83 in 2025, $0.89 in 2026, raised every year; 2021 and 2022 payments include specials that are excluded from the regular series.
- ✓Trap screen Yield 1.54% on the regular dividend; specials excluded; not a trap pattern.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.