Advertisement
New Zealand markets closed
  • NZX 50

    12,309.91
    -15.69 (-0.13%)
     
  • NZD/USD

    0.6003
    -0.0009 (-0.14%)
     
  • ALL ORDS

    8,166.40
    -42.80 (-0.52%)
     
  • OIL

    79.90
    -0.23 (-0.29%)
     
  • GOLD

    2,408.90
    +9.80 (+0.41%)
     

These 3 Companies Generate Substantial Cash

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, Microsoft MSFT, and Broadcom AVGO – all fit the criteria.

In addition, all three provide exposure to the Technology sector. Let’s take a closer look at each.

ADVERTISEMENT

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

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, Microsoft MSFT, and Broadcom AVGO – generate substantial cash and provide exposure to technology.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research