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3 Stocks to Buy for Strong Cash-Generating Abilities
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Strong cash flows reflect financial stability, allowing companies to pay down debt, pursue growth opportunities, and shell out dividend payments. These companies are also better equipped to weather an economic downturn, providing another beneficial advantage for investors from a long-term standpoint.
And for those interested in investing in strong cash flows, three companies – Verizon Communications (VZ - Free Report) , Microsoft (MSFT - Free Report) , and Visa (V - Free Report) – are all cash-generating machines. Let’s take a closer look at each.
Microsoft
A member of the ‘Magnificent 7’, Microsoft shares have helped lead the market over the past year, up 60% and outperforming in a big way. Analysts have taken a bullish stance on the company’s outlook, landing it into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
The company generated nearly $67.5 billion in free cash flow over its latest trailing twelve-month period, owing to its operational efficiency. Investors also stand to enjoy a passive income stream from MSFT shares, currently yielding 0.7% annually.
Image Source: Zacks Investment Research
The company’s growth profile remains constructive, with consensus expectations for its current year suggesting 19% earnings growth on 15% higher sales. Peeking ahead to FY25, earnings and revenue are currently forecasted to climb 13% and 14%, respectively.
Verizon Communications
Verizon shares have modestly outperformed relative to the general market year-to-date, adding roughly 8% in value vs. the S&P 500’s 7% gain. The communications giant has generated $18.7 billion in free cash flow over its latest trailing twelve-month period.
Image Source: Zacks Investment Research
Similar to MSFT, investors stand to reap a passive income from VZ shares, currently yielding a sizable 6.7% annually. Dividend growth is also apparent, with the company carrying a modest 2% five-year annualized dividend growth rate.
Image Source: Zacks Investment Research
Visa
Like the companies above, financial services heavyweight Visa is a serious cash generator, posting $19.1 billion in free cash flow over its latest trailing twelve-month period.
Image Source: Zacks Investment Research
Analysts have taken a positive stance on its current year outlook, with the $9.90 Zacks Consensus EPS estimate up 3.4% over the last year and suggesting year-over-year growth of 13%. Shares have modestly outperformed relative to the S&P 500 year-to-date, gaining 8%.
Image Source: Zacks Investment Research
Shares trade at an elevated multiple but are somewhat cheap on a historical basis, with the current 26.9X forward 12-month earnings multiple beneath the 28.2X five-year median and highs of 40.6X over the same time period.
Bottom Line
Companies boasting strong cash-generating abilities can be great investments, as they have plenty of cash to fuel growth, pay out dividends, and easily wipe out debt. And as mentioned above, these companies are better equipped to handle an economic downturn, undeniably a positive.
For those seeking cash-generators, all three above – Verizon Communications (VZ - Free Report) , Microsoft (MSFT - Free Report) , and Visa (V - Free Report) – fit the criteria nicely.
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3 Stocks to Buy for Strong Cash-Generating Abilities
Strong cash flows reflect financial stability, allowing companies to pay down debt, pursue growth opportunities, and shell out dividend payments. These companies are also better equipped to weather an economic downturn, providing another beneficial advantage for investors from a long-term standpoint.
And for those interested in investing in strong cash flows, three companies – Verizon Communications (VZ - Free Report) , Microsoft (MSFT - Free Report) , and Visa (V - Free Report) – are all cash-generating machines. Let’s take a closer look at each.
Microsoft
A member of the ‘Magnificent 7’, Microsoft shares have helped lead the market over the past year, up 60% and outperforming in a big way. Analysts have taken a bullish stance on the company’s outlook, landing it into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
The company generated nearly $67.5 billion in free cash flow over its latest trailing twelve-month period, owing to its operational efficiency. Investors also stand to enjoy a passive income stream from MSFT shares, currently yielding 0.7% annually.
Image Source: Zacks Investment Research
The company’s growth profile remains constructive, with consensus expectations for its current year suggesting 19% earnings growth on 15% higher sales. Peeking ahead to FY25, earnings and revenue are currently forecasted to climb 13% and 14%, respectively.
Verizon Communications
Verizon shares have modestly outperformed relative to the general market year-to-date, adding roughly 8% in value vs. the S&P 500’s 7% gain. The communications giant has generated $18.7 billion in free cash flow over its latest trailing twelve-month period.
Image Source: Zacks Investment Research
Similar to MSFT, investors stand to reap a passive income from VZ shares, currently yielding a sizable 6.7% annually. Dividend growth is also apparent, with the company carrying a modest 2% five-year annualized dividend growth rate.
Image Source: Zacks Investment Research
Visa
Like the companies above, financial services heavyweight Visa is a serious cash generator, posting $19.1 billion in free cash flow over its latest trailing twelve-month period.
Analysts have taken a positive stance on its current year outlook, with the $9.90 Zacks Consensus EPS estimate up 3.4% over the last year and suggesting year-over-year growth of 13%. Shares have modestly outperformed relative to the S&P 500 year-to-date, gaining 8%.
Shares trade at an elevated multiple but are somewhat cheap on a historical basis, with the current 26.9X forward 12-month earnings multiple beneath the 28.2X five-year median and highs of 40.6X over the same time period.
Bottom Line
Companies boasting strong cash-generating abilities can be great investments, as they have plenty of cash to fuel growth, pay out dividends, and easily wipe out debt. And as mentioned above, these companies are better equipped to handle an economic downturn, undeniably a positive.
For those seeking cash-generators, all three above – Verizon Communications (VZ - Free Report) , Microsoft (MSFT - Free Report) , and Visa (V - Free Report) – fit the criteria nicely.