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Investors love to target companies with strong free cash flow.
In its simplest form, free cash flow is the total cash a company holds onto after paying for operating costs and any capital expenditures.
Free cash flow speaks volumes about a company’s financial health, but in what ways?
A high free cash flow allows for more growth opportunities, a higher potential for share buybacks, stable dividend payouts, and the ability to wipe out any debt with ease.
Simply put, it’s easy to see why it’s such a vital metric.
Generally, companies that display free cash flow strength are well-established and carry highly-successful business operations, undoubtedly perks that any investor looks for.
Three companies that generate substantial cash – Visa (V - Free Report) , UnitedHealth Group (UNH - Free Report) , and Exxon Mobil (XOM - Free Report) – could all be considerations for investors that seek free cash flow strength.
Below is a chart illustrating the year-to-date performance of all three stocks, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s take a closer look at each one.
Exxon Mobil
Exxon Mobil is a U.S.-based oil and gas entity, one of the world's largest publicly traded energy companies.
Analysts have taken a bullish stance on XOM’s near-term earnings outlook as of late, helping land the stock into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In its latest quarter, XOM’s free cash flow came in at a steep $18.3 billion, reflecting a 5.5% sequential uptick and an even more impressive 100% Y/Y uptick.
The company’s free cash flow has recovered nicely from 2020 lows, as we can see in the chart below.
Image Source: Zacks Investment Research
Further, XOM carries an inspiring growth profile, with earnings forecasted to climb 160% on top of 48% Y/Y revenue growth in FY22.
Still, the growth slows down in FY23, with earnings and revenue indicated to decrease by 22% and 9.7%, respectively. This is shown in the chart below.
Image Source: Zacks Investment Research
Visa
Visa is a payments technology company that provides transaction processing services (primarily authorization, clearing, and settlement) to financial institutions and merchant clients.
Visa reported free cash flow of $5.6 billion in its latest quarter, penciling in an 11% sequential uptick and a solid 48% Y/Y change.
Image Source: Zacks Investment Research
The company’s annual dividend currently yields 0.8%, a few ticks below its Zacks Business Services sector average of roughly 1%.
While the yield may be lower than its sector’s average, Visa’s 15% five-year annualized dividend growth rate helps to pick up the slack in a big way.
Image Source: Zacks Investment Research
For the cherry on top, V has consistently impressed with its quarterly results, exceeding earnings and revenue expectations in 11 consecutive quarters.
In its latest release, V exceeded earnings expectations by 3.8% and revenue estimates by 3.1%. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
UnitedHealth
UnitedHealth provides a wide range of healthcare products and services, including health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.
Over the last several months, analysts have been bullish in their earnings outlook regarding UNH’s current and next fiscal year, helping land the stock into a Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In its latest print, UNH’s free cash flow was reported at a sizable $17.8 billion, reflecting a massive 180% sequential uptick and a 150% Y/Y increase.
Image Source: Zacks Investment Research
UnitedHealth’s current annual dividend yield of 1.3% is below its Zacks Medical sector average. Still, similar to Visa, UNH’s 17.5% five-year annualized dividend growth rate makes up for the shortfall.
Image Source: Zacks Investment Research
Other Noteworthy Cash Generators
Now, for those seeking exposure to tech, several companies within the realm also have inspiring free cash flow, including the legendary Microsoft (MSFT - Free Report) and everybody’s favorite, Apple (AAPL - Free Report) .
In Apple’s latest release, free cash flow came in at $20.8 billion, reflecting a 22.7% Y/Y uptick.
And in Microsoft’s latest print, free cash flow was reported at $16.9 billion, representing a 9% Y/Y decline.
Bottom Line
A company displaying free cash flow strength has freedom for growth opportunities, can consistently shell out dividends, and wipe out debt easily.
And when investors are scouting for potential investments, it’s undoubtedly a metric worth paying serious attention to.
For those seeking companies with strong free cash flow, all three stocks above – Visa (V - Free Report) , UnitedHealth Group (UNH - Free Report) , and Exxon Mobil (XOM - Free Report) – could be considered.
Now, for those seeking exposure to tech, Apple (AAPL - Free Report) and Microsoft (MSFT - Free Report) also generate substantial cash, providing additional options for investors.
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These S&P 500 Companies Generate Substantial Cash
Investors love to target companies with strong free cash flow.
In its simplest form, free cash flow is the total cash a company holds onto after paying for operating costs and any capital expenditures.
Free cash flow speaks volumes about a company’s financial health, but in what ways?
A high free cash flow allows for more growth opportunities, a higher potential for share buybacks, stable dividend payouts, and the ability to wipe out any debt with ease.
Simply put, it’s easy to see why it’s such a vital metric.
Generally, companies that display free cash flow strength are well-established and carry highly-successful business operations, undoubtedly perks that any investor looks for.
Three companies that generate substantial cash – Visa (V - Free Report) , UnitedHealth Group (UNH - Free Report) , and Exxon Mobil (XOM - Free Report) – could all be considerations for investors that seek free cash flow strength.
Below is a chart illustrating the year-to-date performance of all three stocks, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s take a closer look at each one.
Exxon Mobil
Exxon Mobil is a U.S.-based oil and gas entity, one of the world's largest publicly traded energy companies.
Analysts have taken a bullish stance on XOM’s near-term earnings outlook as of late, helping land the stock into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In its latest quarter, XOM’s free cash flow came in at a steep $18.3 billion, reflecting a 5.5% sequential uptick and an even more impressive 100% Y/Y uptick.
The company’s free cash flow has recovered nicely from 2020 lows, as we can see in the chart below.
Image Source: Zacks Investment Research
Further, XOM carries an inspiring growth profile, with earnings forecasted to climb 160% on top of 48% Y/Y revenue growth in FY22.
Still, the growth slows down in FY23, with earnings and revenue indicated to decrease by 22% and 9.7%, respectively. This is shown in the chart below.
Image Source: Zacks Investment Research
Visa
Visa is a payments technology company that provides transaction processing services (primarily authorization, clearing, and settlement) to financial institutions and merchant clients.
Visa reported free cash flow of $5.6 billion in its latest quarter, penciling in an 11% sequential uptick and a solid 48% Y/Y change.
Image Source: Zacks Investment Research
The company’s annual dividend currently yields 0.8%, a few ticks below its Zacks Business Services sector average of roughly 1%.
While the yield may be lower than its sector’s average, Visa’s 15% five-year annualized dividend growth rate helps to pick up the slack in a big way.
Image Source: Zacks Investment Research
For the cherry on top, V has consistently impressed with its quarterly results, exceeding earnings and revenue expectations in 11 consecutive quarters.
In its latest release, V exceeded earnings expectations by 3.8% and revenue estimates by 3.1%. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
UnitedHealth
UnitedHealth provides a wide range of healthcare products and services, including health maintenance organizations (HMOs), point of service plans (POS), preferred provider organizations (PPOs), and managed fee-for-service programs.
Over the last several months, analysts have been bullish in their earnings outlook regarding UNH’s current and next fiscal year, helping land the stock into a Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In its latest print, UNH’s free cash flow was reported at a sizable $17.8 billion, reflecting a massive 180% sequential uptick and a 150% Y/Y increase.
Image Source: Zacks Investment Research
UnitedHealth’s current annual dividend yield of 1.3% is below its Zacks Medical sector average. Still, similar to Visa, UNH’s 17.5% five-year annualized dividend growth rate makes up for the shortfall.
Image Source: Zacks Investment Research
Other Noteworthy Cash Generators
Now, for those seeking exposure to tech, several companies within the realm also have inspiring free cash flow, including the legendary Microsoft (MSFT - Free Report) and everybody’s favorite, Apple (AAPL - Free Report) .
In Apple’s latest release, free cash flow came in at $20.8 billion, reflecting a 22.7% Y/Y uptick.
And in Microsoft’s latest print, free cash flow was reported at $16.9 billion, representing a 9% Y/Y decline.
Bottom Line
A company displaying free cash flow strength has freedom for growth opportunities, can consistently shell out dividends, and wipe out debt easily.
And when investors are scouting for potential investments, it’s undoubtedly a metric worth paying serious attention to.
For those seeking companies with strong free cash flow, all three stocks above – Visa (V - Free Report) , UnitedHealth Group (UNH - Free Report) , and Exxon Mobil (XOM - Free Report) – could be considered.
Now, for those seeking exposure to tech, Apple (AAPL - Free Report) and Microsoft (MSFT - Free Report) also generate substantial cash, providing additional options for investors.