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 downturns, providing another beneficial advantage for investors from a long-term standpoint.
And for those seeking cash-generating machines, three mega-cap giants – Microsoft MSFT, Apple AAPL, and Alphabet GOOGL – all fit the criteria nicely. Let’s take a closer look at how each currently stacks up.
Apple Shares Bounce Back
Apple shares have jumped back into favor over the last month after a notably slow start to 2024, gaining 15% and widely outperforming relative to the S&P 500. Favorable news concerning its China iPhone shipments has aided performance, with recent commentary surrounding AI also providing tailwinds.
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The company has long been a cash-generating machine, providing many benefits over the years, including higher dividend payouts. In fact, Apple raised its quarterly payout in its latest quarterly release, reflecting the 12th consecutive year of higher payouts.
Shares yield a modest 0.5% annually, though the company’s 4.9% five-year annualized dividend growth helps bridge the gap.
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Analysts have positively revised their earnings expectations for the mega-cap giant, landing it into a favorable Zacks Rank #2 (Buy). Though the revisions haven’t been robust, it’s undoubtedly a bullish development for the stock and provides the fuel needed to continue outperformance.
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Microsoft Posts Strong Cloud Results
Microsoft shares have helped lead the market’s charge all year long, up nearly 25% and seeing regular positivity following quarterly results. Analysts have revised their earnings expectations for its current fiscal year consistently over the last year, with the $11.77 per share expected up roughly 9% over the last year.
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Recent cloud strength has analysts optimistic, with the company expected to benefit nicely from AI. Cloud revenue popped 23% year-over-year throughout its latest period, reflecting a reacceleration and positively shocking investors.
Many had feared a cloud slowdown, which was present for a few periods, but the recent results overall paint positivity moving forward. Like AAPL, strong cash flows have aided its shareholder-friendly nature, with Microsoft sporting a 10% five-year annualized dividend growth rate.
Alphabet Stays in Growth Mode
Alphabet shares have experienced positivity all throughout 2024, up nearly 40%. Like MSFT, the revisions trend for its current fiscal year has been notably positive, with the $7.60 per share expected climbing 14% over the last year.
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The company positively shocked investors when it announced the initiation of a quarterly dividend back in April. Alphabet’s cash-generating nature allows for future dividend growth, with the company posting $16.8 billion in free cash flow throughout its latest period.
And to little surprise, the mega-cap giant remains firmly in growth mode, as consensus expectations suggest a 31% pop in earnings on 14% higher sales in FY24. Growth spills over to FY25, with earnings and revenue forecasted to climb 13% and 12%, respectively.
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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 companies above – Microsoft MSFT, Apple AAPL, and Alphabet GOOGL – fit the criteria nicely.
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