Let's let's come back to something. We promise to talk. So we promise to talk about dividends and finish the dividend conversation. Um, podcast before last. And then we got excited about the idea of mindful e think when we're talking about dividends, we were first off. Let me just kind of summarize dividends, right? Well, why don't you summarize difference? You remember what we've discussed about it? Not that well, to be honest, so I know what dividends are. What are they? They are a payment out of free cash flow to holders of that stock. Very, very right on and a T least. That's the theory. That's the theory. That's not the truth. It often is not the truth and companies use. Companies use dividends to pretend that they're better than they are. And so, while dividends should be paid to the owners out of free cash flow. And if you owned the entire business, you would certainly, uh, be taking the free cash flow from the business. If you owned it and it was private, you would just take the free cash flow from the business or what we would call owners cash flow, which we discussed last time is a little different than free cash flow. Free cash flow is the money. You have the cash you have left after you pay, um, off all of your cash requirements, including growing the business and owners. Cash flow is everything you have left after that. So free free cash flow is sorry. Free cash flows. What's available after you after you have your operating cash and then you pay off the requirements to grow the business. Let me stay it like that. And the owners cash flow is the operating cash minus the requirements to grow the business and keep the business going. That's what you have left, if anything. And that's the owners cash flow. And if you are the owner of the business and that's like the take home pay of the owner that they took everything that's the owners take home pay. Yeah, And So, for example, if you're Warren Buffett and you have 60 private companies, you will. It probably instruct all of your managers to manage the company Onley use the cash necessary to grow the business at a steady rate, which you project as the CEO of that company. Okay, we're gonna grow at 10% a year. And this is the cash I need to do that. Right? To advertise, to build new stores, whatever. And then Buffett would then say and then send me everything else. Yeah, and then he'll go invest that. All right, so that's that's stuff that they're sending to buffet. That's owner cash flow. And where did the dividends come out of out of owner cash flow owner cash flow. Theoretically, they come out of owner cash flow. But because as stockholders, we are owners, stockholders. We are owners, at least theoretically, we're owners. Although a lot of companies we technically are we are Well, you're right, it's not. Theoretically, it's. In fact, we are. But often public companies don't treat the share holders as if they are owners. They just treat them as if they're suckers. Well, it's owners being an owner without any control of any kind of business, exactly, including what they're doing with owners cash flow. So ah, good company will be paying dividends out of owner cash flow and not be paying dividends when there isn't any owner cash flow. Right? But what happens is cos lock they wanna lock in the price of their stock. And so they want to produce a cash flow for people called the dividend that gets people locked in that won't get rid of the stock because they want that dividend. And so if a company is struggling and they don't have any owner cash flow, But they have this large audience of people who expect to get this dividend of, let's say, 3% a year or 4% a year. They're expecting that dividend, and there's no owner cash flow to pay it. What would you do as the guys who are running the company and don't want to get fired find a way to pay it? Yeah, you'd find a way to pay it. And so the way you'd find to pay it is you could either cut back on your money. You're spending on growth. You could cut back temporarily on money that you need to spend the build new plants and just run the old ones for longer than you would have plan. Or you could borrow money. Or you could just take money out of equity of the company that sitting in cash that you haven't used for anything. It's kind of a big pile of cash, and you could pay it out of that. So there's there's ways besides just owner cash flow that you could pay dividends. And the you know the problem with that is it's kind of a temptation for kind of evil management management that's immoral or unethical to continue paying a dividend. Even though they don't have any owner cash flow. They're not gonna have any owner cash flow. They're running the company into the dirt. But they don't want all those older people who are depending on that dividend to worry. Well, because if those people start to worry, then it gets into the financial press and then everyone starts selling. Everyone starts selling, and then they get fired. And so, you know, devious little guys that they are. They just borrow the money. And General Motors is like one of the biggest culprits of this, I think. What did they dio? They were running out of money. They were getting smoked in their whole market, right? Toyota was handing in there, but and they didn't have owner cash flow, and they really couldn't even keep up the plants as well as they needed Thio. But they just kept paying that big dividend that they've been paid 50 years level that they had kept it at the same level as long as they possibly could, until they had borrowed so stupid much money that they eventually went bankrupt. Eso as somebody let's say I own General Motors back then, and I wanted to find out you know how on earth they were paying my dividend, I could see in their financial statements that they're borrowing a ton of money, right? Absolutely. In fact, if you look at rule the book Rule number one, I spell it out there and I show you the financial statements. But you could look at well, you could have looked at GM financial statements, but now they they're gone. They're no longer on the Web because GM got taken in the bankruptcy. So our I sort of bankruptcy and, um and so now we can't really look back on it. But if companies air borrowing money, you really have to pay attention to whether or not they're being evil. You really have to be careful. I'll give you I'll give you one to look at right Now IBM is apparently borrowing money and well, there definitely borrowing money, and they're paying large dividends. So you have to look and you have to see what is the operating cash flow, which is on the cash flow statement. The big, bold line that says operating cash flow. And then you subtract the purchase of property and equipment, which is another line on the cash flow and what you have leftist free cash flow. And, uh, what you have left is actually owner cash flow. And that's available to pay dividends to buyback stocks with stock with to buy companies with whatever they want to use it for. So cash. If they want. They could, which last time we talked about Apple did and Carl Icahn came in and said, I you know, I want some of that right? So dividends are are something that, in general are very important to a large class of investors who are living on dividends. And so I think maybe what you're saying is just because a company isn't or sorry, just because the company is borrowing a lot of money doesn't automatically mean they're paying the dividends out of that borrowed money in order to hide, Um, a lack of cash flow. It's not necessarily. So you need We need to figure out how they're using that borrowed money. Yeah. The main thing is, just do they have enough owners cash flow to be paying a dividend? Okay, just take a look at it and see if it if it makes sense or if there paying out twice as much dividend as they have in owner cash flow. And then again, you got to cut. You really have to understand the business a little bit in order to know that their borrowing money right now because they are financing computers. Which is what Apple, which is what IBM does. Or John Deere tractor. So they have what looks like a lot of debt. But it isn't really because it's all secured by tractors and computers. So just you just gotta pay a little bit attention. If that's hard. If that feels hard, you don't do those companies you just don't bother with. Stick to burrito with stick. Stick to what's the hot jeans manufacturer? You know, e way all have areas of the market, which we just get, you know, we just understand them. And and so when we come to looking at dividends, we gotta always go back to the basics that Charlie talked about Charlie Munger, which is be sure you're capable of understanding the business. And then it has intrinsic characteristics that continue to allow it to compete well, because it's that ability to continue to compete well that provides it with the cash flow that it can use to pay.