When scouting for stocks, a standard metric that comes into focus is free cash flow. In its simplest form, free cash flow is the total cash a company keeps after operating costs and capital expenditures.
Free cash flow strength allows for more growth opportunities, a higher potential for share buybacks, stable dividend payouts, and the ability to wipe out any debt easily.
For those interested in cash-generating machines, three companies – Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and Broadcom (AVGO - Free Report) – all fit the criteria.
In addition, all three provide exposure to the Technology sector. Let’s take a closer look at each.
Apple
Apple is often labeled the ‘King’ of free cash flow for understandable reasons; the company generated a mighty $25.6 billion in free cash flow throughout its latest quarter. And over the last trailing twelve-months, the tech titan has generated nearly $100 billion of free cash flow.
It’s no secret that Apple shares are pricey, with the current 29.3X forward earnings multiple sitting well above the 24.5X five-year median and the Zacks Computer and Technology sector average. Still, investors have had little issue forking up the premium given Apple’s favorable financial standing.
Microsoft
Microsoft shares have jumped back into favor in 2023 amid the broader technology rebound, with the company’s recent dive into artificial intelligence making investors ecstatic. MSFT posted free cash flow of $17.8 billion in its latest release, recovering nicely from the prior quarter.
MSFT shares also provide a passive income stream, with the company’s dividend currently yielding 0.8% annually. And the company has shown a commitment to increasingly rewarding its shareholders, sporting a 10% five-year annualized dividend growth rate.
Broadcom
Broadcom shares found plenty of attention following news of a new multiyear, multibillion-dollar deal with heavyweight Apple for components made in the USA. The semiconductor player posted free cash flow of $3.9 billion in its latest quarter, improving a solid 16% from the year-ago period.
In addition, the company’s 78.6% TTM return on equity is worth highlighting, indicating a higher efficiency level in generating profit from existing assets relative to peers.
Bottom Line
When scouting potential portfolio additions, free cash flow is undoubtedly a metric worth serious attention.
A company displaying free cash flow strength has freedom for growth opportunities, can consistently shell out dividends, and wipe out debt easily.
And all three companies above – Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and Broadcom (AVGO - Free Report) – generate substantial cash and provide exposure to technology.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
When scouting for stocks, a standard metric that comes into focus is free cash flow. In its simplest form, free cash flow is the total cash a company keeps after operating costs and capital expenditures.
Free cash flow strength allows for more growth opportunities, a higher potential for share buybacks, stable dividend payouts, and the ability to wipe out any debt easily.
For those interested in cash-generating machines, three companies – Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and Broadcom (AVGO - Free Report) – all fit the criteria.
In addition, all three provide exposure to the Technology sector. Let’s take a closer look at each.
Apple
Apple is often labeled the ‘King’ of free cash flow for understandable reasons; the company generated a mighty $25.6 billion in free cash flow throughout its latest quarter. And over the last trailing twelve-months, the tech titan has generated nearly $100 billion of free cash flow.
It’s no secret that Apple shares are pricey, with the current 29.3X forward earnings multiple sitting well above the 24.5X five-year median and the Zacks Computer and Technology sector average. Still, investors have had little issue forking up the premium given Apple’s favorable financial standing.
Microsoft
Microsoft shares have jumped back into favor in 2023 amid the broader technology rebound, with the company’s recent dive into artificial intelligence making investors ecstatic. MSFT posted free cash flow of $17.8 billion in its latest release, recovering nicely from the prior quarter.
MSFT shares also provide a passive income stream, with the company’s dividend currently yielding 0.8% annually. And the company has shown a commitment to increasingly rewarding its shareholders, sporting a 10% five-year annualized dividend growth rate.
Broadcom
Broadcom shares found plenty of attention following news of a new multiyear, multibillion-dollar deal with heavyweight Apple for components made in the USA. The semiconductor player posted free cash flow of $3.9 billion in its latest quarter, improving a solid 16% from the year-ago period.
In addition, the company’s 78.6% TTM return on equity is worth highlighting, indicating a higher efficiency level in generating profit from existing assets relative to peers.
Bottom Line
When scouting potential portfolio additions, free cash flow is undoubtedly a metric worth serious attention.
A company displaying free cash flow strength has freedom for growth opportunities, can consistently shell out dividends, and wipe out debt easily.
And all three companies above – Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and Broadcom (AVGO - Free Report) – generate substantial cash and provide exposure to technology.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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