Don’t you wish there was a way to know what companies would be around for the long haul? These are companies that if their stock took a hit, it would only be a matter of time before they rebounded. Fortunately, those companies are out there. We'll take a look at five below with major free cash flow.

Free Cash Flow

Revenue and earnings are imperative metrics, but both can be manipulated. For example, retailers can manipulate revenue by opening more stores, which is why it’s so important to pay more attention to their comps numbers. As far as earnings go, they can be skewed by corporate buybacks, which reduce the share count and improve earnings per share (EPS). Cost-cutting can also play a role here, but a company that is cutting costs is surviving not thriving. Despite that, many investors respond positively to cost-cutting.

The reasons above are why free cash flow should never be overlooked. Cash flow can’t be manipulated. It also opens many doors, including dividend payments, buybacks, acquisitions for inorganic growth, innovation for organic growth and debt reduction. The bigger the free cash flow number, the more maneuverability the corporation is going to have. This can allow for growth during the good times and weathering the storm during the bad times, whether those bad times are related to the broader market, the industry or the company itself.

All five companies below are household names. That in itself plays a big role for staying power because consumers trust the brands for the most part. 

While free cash flow is one of the most important metrics, it’s still only one of many. We’ll also take a look at which of the five companies below has been growing their top line over the past three fiscal years, are consistently profitable, debt-to-equity ratio, one-year stock performance, and dividend yield.

Five Free Cash Flow Monsters

Monsters are usually scary, but these monsters should only be scary if you’re betting against them. This, by the way, brings up another important point. The short interest on these five stocks is very low. The highest is 2.11%. This indicates that big money is smart enough not to bet against household names that generate strong cash flow and possess enormous maneuverability.

Let’s get to those free cash flow monsters (free cash flow generation is based on the past 12 months):


 



FCF



D/E Ratio



1-Year Stock Performance



Dividend Yield



AAPL



$49.84 billion



0.61



-22.93%



2.36%



VZ



$18.90 billion



5.47



1.46%



4.56%



MSFT



$16.96 billion



0.63



10.73%



2.79%



WMT



$16.04 billion



0.64



-4.60%



2.85%



PFE



$15.93 billion



0.62



-0.92%



3.52%


All five of the companies above have been profitable over the past three fiscal years, yet only Apple Inc., Verizon Communications Inc., and Microsoft Corp. have delivered consistent revenue growth over the same time frame. Verizon has a high debt-to-equity ratio, which is usually a negative, but the cash flow generation minimizes the debt risk. Then you have Apple, which is the weakest stock performer of the group. Along with Microsoft it still likely possesses the best long-term prospects. The only company on this chart that hits on all cylinders, and isn’t as discretionary as Apple, is Microsoft.

There might be years when owning MSFT is like watching paint dry and years when it seems like a former champion. The truth is that this juggernaut is so well managed and diversified while generating massive cash flow and delivering consistent profits that it should always be a matter of time before a rebound occurs.

The Bottom Line

The free cash flow monsters above should be considered for further research, but only if you’re a long-term investor. There are many question markets about the global economy right now and no stock is invincible. That said, if history continues to repeat itself then the five stocks above should be safer than most. 

Dan Moskowitz does not have any positions in AAPL, VZ, MSFT, WMT or PFE.