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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
Dividend investors love simple stories: strong brands, steady profits, a board that “always pays.” But the market’s most expensive lesson is that dividends don’t come from the income statement. They come from cash—and specifically from cash generated by the core business. That distinction is now the difference between holding a yield stock with confidence and holding one with crossed fingers.
Consider RFM and Monde Nissin—two consumer names that can appear, on the surface, to offer what income investors crave: regular payouts and recognizable brands. Yet their most recent filings tell two sharply different dividend stories. One is a dividend that (for now) looks underwritten by operating cash. The other is a dividend that, at least through nine months of 2025, looks increasingly dependent on working-capital luck and balance-sheet drawdown.
RFM: Profitable on paper, but cash-starved where it matters
RFM’s third-quarter report shows what many investors would call “fine”: net revenues for the nine months ended September 30, 2025 reached ₱15.23 billion, and net income came in at ₱1.252 billion, up year-on-year.
But income investors don’t get paid in net income—they get paid in cash. And here’s the uncomfortable contrast: RFM’s net cash generated from operating activities in the same nine-month period fell to only ₱141 million, down from ₱1.304 billion in the prior-year period.
That collapse in operating cash flow didn’t happen because the business suddenly stopped “earning.” In fact, RFM’s cash flow statement shows ₱2.220 billion of operating cash before working-capital changes—suggesting the underlying earnings engine was still functioning.
The problem is what happened next: working capital swallowed the cash. Inventories consumed ₱1.091 billion of cash, and accounts payable and accrued liabilities declined by ₱1.163 billion, another large cash outflow. Receivables contributed an inflow of ₱181 million, but it was nowhere near enough to offset the drains.
This is the “dividend sustainability” trap: the company remains profitable, yet cash becomes trapped in the mechanics of stocking shelves and paying suppliers. And when that happens, dividends shift from being “operationally funded” to being “liquidity managed.”
The dividend math makes the point sharper. In the nine months ended September 30, 2025, RFM paid ₱664 million in dividends—more than 4x the ₱141 million it generated from operations.
Meanwhile, cash and cash equivalents fell to ₱2.029 billion as of September 30, 2025 from ₱3.162 billion at end-2024—evidence that the cash cushion was drifting lower while dividends continued to go out the door.
To be clear: none of this proves an imminent dividend cut. It does, however, support a more cautious statement: RFM’s dividend in 2025 looked less like a distribution funded by operating cash and more like a distribution supported by working-capital normalization and existing liquidity.
This is where your “expansion” concern becomes more than hypothetical. RFM did record ₱439 million in PPE acquisition outflows in 9M 2025. When operating cash is thin, even routine reinvestment competes with dividends—because both are paid in the same currency: cash.
MONDE: A dividend story backed by operating cash—and a management “hint” for FY2026
Now compare that with Monde Nissin’s numbers for the nine months ended September 30, 2025. MONDE reported ₱8.7368 billion in net cash flows from operating activities—an order of magnitude larger than its dividend cash requirement.
In the same period, MONDE paid cash dividends totaling ₱2.6953 billion (₱0.15 per share, paid May 22, 2025).
This is what a yield investor wants to see: dividends being “earned” in cash terms, not merely “declared” in earnings terms. With ₱8.7368 billion in operating cash and ₱2.6953 billion in dividends, MONDE still had substantial cash generation left to reinvest, service obligations, or simply build buffers.
MONDE also entered the period with meaningful liquidity and ended it with meaningful liquidity: cash and cash equivalents were ₱14.4519 billion as of September 30, 2025 (slightly up from ₱14.1582 billion at end-2024).
That stability matters for dividend investors because it implies the company is not funding dividends by draining the tank. It’s funding dividends while keeping the tank full.
Critically, MONDE also demonstrates that it can invest without immediately putting the dividend on the chopping block. It spent ₱2.8840 billion on additions to property, plant and equipment in 9M 2025, and still produced robust operating cash.
On leverage, the company reported a debt-to-equity ratio of 0.34:1.00 as of September 30, 2025, improving from 0.41:1.00 at end-2024—suggesting a balance sheet that is not being stretched to preserve dividends.
Even the “risk overhang” in MONDE—the Meat Alternative segment (Quorn)—is now a more defined, more bounded variable than it was before. The segment still posted a net loss of about ₱1.0427 billion in 9M 2025, but the core APAC Branded Food & Beverage segment generated net income of roughly ₱7.7138 billion, which continues to dominate the earnings base.
Then comes the forward-looking signal that makes yield investors pay attention. In a January 30, 2026 disclosure, MONDE said its strong balance sheet and cash position support the preservation of unrestricted retained earnings and enhance flexibility to return capital to shareholders, including dividends. Management added that the company can consider potentially meaningful dividend distributions in FY 2026, subject to regulatory clearances and board approval.
This is not a promise. But for a dividend investor, it is a material “tone shift”: it frames dividends not as a reluctant afterthought but as a deliberate capital-allocation option enabled by financial capacity.
So why rotate? Because the quality of yield matters more than the height of yield
The RFM vs MONDE comparison boils down to a simple dividend principle that markets relearn every cycle: A dividend covered by operating cash flow is a dividend with resilience; a dividend not covered by operating cash flow is a dividend with conditions.
RFM’s filings show that its 2025 dividend sustainability hinges on working capital behaving—and that’s precisely the kind of dependency that can break in a slowdown, or in a period when inventory remains elevated and supplier terms tighten.
MONDE’s filings, by contrast, show a dividend that is already being paid out of operating cash, with large liquidity buffers and moderate leverage—and then an explicit management statement that dividend capacity in FY2026 could be meaningful, pending approvals.
For an income investor making a substitution decision, that’s the practical case: rotate away from a dividend that looks increasingly “managed” and toward a dividend that looks “underwritten.”
A yield investor’s checklist (the only kind that matters)
If you treat this as a dividend rotation rather than a “trade,” here are the scorecard items that matter most:
- For RFM: watch whether operating cash flow rebounds materially from ₱141 million and whether inventory and payables normalize from the cash-draining pattern seen in 9M 2025.
- For MONDE: watch whether operating cash flow remains strong (9M 2025 baseline ₱8.7368 billion), whether the dividend cadence holds (₱0.15/share paid in 2025; ₱0.16/share declared for early 2026), and whether FY2026 “meaningful dividends” moves from narrative to board action.
Because in the end, the best dividend stock is not the one that pays the most today. It’s the one that can keep paying—without needing a favorable quarter to make the math work.
We’ve been blogging for free. If you enjoy our content, consider supporting us!
Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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