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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, UnitedHealth Groupand Exxon Mobil– could all be considerations for investors that seek free cash flow strength.
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).
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.
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.
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.
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.
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%.
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).
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.
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.
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 Microsoftand everybody's favorite, Apple.
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, UnitedHealth Group and Exxon Mobil – could be considered.
Now, for those seeking exposure to tech, Apple and Microsoft also generate substantial cash, providing additional options for investors.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Visa, UnitedHealth Group, Exxon Mobil, Microsoft, Apple
For Immediate Release
Chicago, IL – November 21, 2022 – Today, Zacks Investment Ideas feature highlights Visa (V - Free Report) , UnitedHealth Group (UNH - Free Report) , Exxon Mobil (XOM - Free Report) , Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) .
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, UnitedHealth Groupand Exxon Mobil– could all be considerations for investors that seek free cash flow strength.
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).
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.
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.
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.
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.
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%.
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).
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.
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.
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 Microsoftand everybody's favorite, Apple.
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, UnitedHealth Group and Exxon Mobil – could be considered.
Now, for those seeking exposure to tech, Apple and Microsoft also generate substantial cash, providing additional options for investors.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.