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Let’s face it - searching for stocks can be difficult with so many options. However, one way to cut out the bad apples is by focusing on stocks with strong free cash flow.
But what is free cash flow, and why does it matter?
In its simplest form, free cash flow is the amount of cash a company keeps after paying for operating costs and capital expenditures.
A high free cash flow allows for more growth opportunities, consistent dividend payouts, and the ability to pay off debt easily.
As we can see, the benefits of strong cash-generating abilities are undoubtedly massive.
And interestingly enough, three tech titans – Apple (AAPL - Free Report) , Alphabet (GOOGL - Free Report) , and Broadcom (AVGO - Free Report) – all boast strong cash-generating abilities.
Let’s take a closer look at each one.
Apple
We’ve all become highly familiar with Apple, the technology heavyweight that has revolutionized the mobile phone landscape with its flagship iPhone.
Apple is commonly seen as the king of free cash flow; in its latest quarter, the heavyweight generated roughly $30.2 billion in free cash flow, growing 45% sequentially.
Image Source: Zacks Investment Research
Investors will have to fork up a premium for shares. AAPL’s current forward earnings multiple of 24.9X is a few ticks above its 23.7X five-year median but remains below highs of 31.3X in 2022.
The stock carries a Value Style Score of “D.”
Image Source: Zacks Investment Research
Alphabet
Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.
Unlike Apple, GOOGL shares trade at a nice discount relative to their historic levels; Alphabet’s 18.1X forward earnings multiple is well beneath the 26.1X five-year median and Zacks Computer and Technology sector average.
Image Source: Zacks Investment Research
It’s hard to ignore the company’s free cash flow strength, with GOOGL reporting free cash flow of $16 billion in its latest quarter. Like Apple, Alphabet is one of the top cash-generating machines within the S&P 500.
Image Source: Zacks Investment Research
Broadcom
Broadcom is a premier designer, developer, and global supplier of a broad range of semiconductor devices.
Broadcom’s dividend metrics would excite any income-focused investor; its annual dividend presently yields 2.9%, more than triple that of the Zacks Computer and Technology sector.
And to top it off, the company’s 21% five-year annualized dividend growth rate reflects a solid commitment to increasingly rewarding shareholders.
Image Source: Zacks Investment Research
AVGO raked in nearly $4 billion in free cash flow in its latest quarter, growing more than 16% year-over-year. As we can see in the chart below, Broadcom’s free cash flow has been growing nicely.
Image Source: Zacks Investment Research
Bottom Line
With so many options out there, it seems nearly impossible to find the right stocks.
However, by focusing on free cash flow strength, investors can block much of the noise.
For those interested in companies that generate serious cash, all three companies above – Apple (AAPL - Free Report) , Alphabet (GOOGL - Free Report) , and Broadcom (AVGO - Free Report) – could be considerations.
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These 3 Tech Companies Generate Substantial Cash
Let’s face it - searching for stocks can be difficult with so many options. However, one way to cut out the bad apples is by focusing on stocks with strong free cash flow.
But what is free cash flow, and why does it matter?
In its simplest form, free cash flow is the amount of cash a company keeps after paying for operating costs and capital expenditures.
A high free cash flow allows for more growth opportunities, consistent dividend payouts, and the ability to pay off debt easily.
As we can see, the benefits of strong cash-generating abilities are undoubtedly massive.
And interestingly enough, three tech titans – Apple (AAPL - Free Report) , Alphabet (GOOGL - Free Report) , and Broadcom (AVGO - Free Report) – all boast strong cash-generating abilities.
Let’s take a closer look at each one.
Apple
We’ve all become highly familiar with Apple, the technology heavyweight that has revolutionized the mobile phone landscape with its flagship iPhone.
Apple is commonly seen as the king of free cash flow; in its latest quarter, the heavyweight generated roughly $30.2 billion in free cash flow, growing 45% sequentially.
Image Source: Zacks Investment Research
Investors will have to fork up a premium for shares. AAPL’s current forward earnings multiple of 24.9X is a few ticks above its 23.7X five-year median but remains below highs of 31.3X in 2022.
The stock carries a Value Style Score of “D.”
Image Source: Zacks Investment Research
Alphabet
Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.
Unlike Apple, GOOGL shares trade at a nice discount relative to their historic levels; Alphabet’s 18.1X forward earnings multiple is well beneath the 26.1X five-year median and Zacks Computer and Technology sector average.
Image Source: Zacks Investment Research
It’s hard to ignore the company’s free cash flow strength, with GOOGL reporting free cash flow of $16 billion in its latest quarter. Like Apple, Alphabet is one of the top cash-generating machines within the S&P 500.
Image Source: Zacks Investment Research
Broadcom
Broadcom is a premier designer, developer, and global supplier of a broad range of semiconductor devices.
Broadcom’s dividend metrics would excite any income-focused investor; its annual dividend presently yields 2.9%, more than triple that of the Zacks Computer and Technology sector.
And to top it off, the company’s 21% five-year annualized dividend growth rate reflects a solid commitment to increasingly rewarding shareholders.
Image Source: Zacks Investment Research
AVGO raked in nearly $4 billion in free cash flow in its latest quarter, growing more than 16% year-over-year. As we can see in the chart below, Broadcom’s free cash flow has been growing nicely.
Image Source: Zacks Investment Research
Bottom Line
With so many options out there, it seems nearly impossible to find the right stocks.
However, by focusing on free cash flow strength, investors can block much of the noise.
For those interested in companies that generate serious cash, all three companies above – Apple (AAPL - Free Report) , Alphabet (GOOGL - Free Report) , and Broadcom (AVGO - Free Report) – could be considerations.