Equinix Has Negative Free Cash Flow. So How Is Its Dividend Still Covered?
Equinix (NASDAQ:EQIX) shares trade at $1,058.51, up 40.24% year-to-date. The usual dividend checks make the stock look like a weak payer. Free cash flow is negative because of $5-$6B in planned 2026 capex, and the trailing P/E sits near 61. A different number funds the dividend: the AFFO payout ratio.
One Number Tells You If the Dividend Is Safe
Adjusted funds from operations (AFFO) starts with net income and adds back depreciation, a non-cash charge on buildings that often hold their value. It then deducts the maintenance spending needed to keep existing data centers running. What remains is the recurring cash the business produces. REITs pay dividends out of that cash, so net income understates how much they can afford.
Equinix shows the gap clearly. Third-quarter GAAP EPS was $4.93, while diluted AFFO per share was $11.64. Against a quarterly dividend of $5.16, the payout used about 44.3% of AFFO, which means about 2.26x coverage.
Coverage Holds Below 50% All Year
Q3 got a lift from a one-time $54M atNorth joint venture fee, so the full year gives a cleaner read. In Q1, AFFO per share of $10.79 put the payout at about 47.8%. Management now guides 2026 AFFO per share to $43.71-$44.11. Set against the $20.64 annualized dividend, that is a payout of roughly 46.8% to 47.2%. In dollar terms, expected cash dividends of about $2.037 billion account for under half of guided AFFO of $4.340-$4.380 billion.
The trend points the right way. AFFO guidance went up for the third consecutive quarter, and normalized AFFO per share rose 12% year over year in Q3. Demand is behind it: annualized gross bookings hit a record $533M, up 35%. New-deal pricing rose 12%, churn was only 1.7%, and stabilized assets earned a 27% cash-on-cash return.
Signals That Would Change the Math
The bullish case is AFFO per share growing at double digits while the payout stays in the mid-40s. That would leave room for raises, as the 10% increase was declared with Q4 2025 results, while keeping half of AFFO to fund new capacity. Interconnections are worth tracking too. Equinix added 6,900 net interconnections last quarter, and that revenue grew 10% at stabilized assets versus 7% for colocation.
The bearish case is debt. Total debt principal rose to $25.2B from $21.4B at year-end 2025, and net leverage stands at 4.1x. Debt now has a combined rate of 3.2%. As that debt refinances at higher rates, interest costs would cut into AFFO and push the payout ratio up even with a flat dividend. Management also still assumes 2% to 2.5% churn for the rest of the year.
The next test is the Q4 earnings report. Equinix announced last year’s raise alongside those results, so watch whether the new increase keeps pace with AFFO growth.
Verdict on the Payout
A payout that uses less than half of growing AFFO tells you more about Equinix’s dividend than negative free cash flow or a 61x earnings multiple does.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
