3 growth stocks that generated $179 billion in free cash flow in 12 months


A number that may be even more important than revenue or profit is a company’s free cash flow (FCF). This metric measures the operating cash flow that remains after a business has covered its operating and capital expenses. If positive, that’s a great sign that the business is growing at a sustainable pace and could potentially fund more growth in the future.

Three companies that report tens of billions of dollars in free cash flow each year are Apple (NASDAQ:AAPL), Pfizer (NYSE: PFE), and Citigroup (NYSE:C). These are great companies to invest in for the long term, and they could be safe buys even if the economy faces some headwinds in 2022.

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Apple: $93 billion FCF

Tech giant Apple is king when it comes to cash. Combine high-priced products and a loyal fan base, and you have a very successful business. This diverse company has plenty of ways to grow its business — from iPhones and iPads to Apple Music and its Apple TV+ streaming video service.

It can also easily buy new businesses. Over the past 12 months, the company reported free cash flow of $93 billion. And as of September 25, it had cash and cash equivalents totaling $34.9 billion on its balance sheet.

While Apple has plenty of room to increase its dividend, which at the current share price only yields a modest 0.51% (vs. S&P500average return of 1.3%), management prefers to reward investors with share buybacks. Its buybacks have totaled $86 billion over the past four quarters.

Apple is a cash-generating beast and one of the safest stocks investors can own today. The mountains of money he brings are not short of options for long-term growth. And with the company coming off a record-breaking 2021 fiscal year in which sales grew 33% to $365.8 billion, its operations have never looked better.

Doctor giving medicine to a patient.

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Pfizer: FCF of $29.2 billion

Sales of its COVID-19 vaccine have provided a financial windfall for Pfizer over the past 12 months. In 2020 and 2019, the healthcare giant accumulated $11.6 billion and $10 billion in free cash flow, respectively. But over the past four quarters, its free cash flow has jumped to $29.2 billion.

Pfizer’s dividend yields 2.9% above average at the current stock price, and the company has increased its quarterly payouts this year by 2.6%, from $0.39 to $0.40. However, the modest increase suggests management may have other cash flow plans, such as acquisitions.

Last month, he announced a $6.7 billion cash deal to buy Arena Pharmaceuticals, a clinical-stage healthcare company focused on immuno-inflammatory diseases. This could boost Pfizer’s pipeline and contribute to greater long-term growth.

This month he also announced that he would be partnering with an immunotherapy specialist BioNTech to develop an mRNA-based shingles vaccine. The companies previously collaborated on their COVID-19 vaccine, Comirnaty. BioNTech will receive an upfront cash payment of $75 million for this latest collaboration, along with a capital investment of $150 million.

In the first nine months of 2021, Pfizer’s revenue grew 91% year over year to $57.7 billion. Nearly half of that – $24.3 billion – came from Comirnaty sales. Looking ahead, the company can continue to count on a strong pace of sales of Comirnaty, as well as sales of Paxlovid, its oral treatment for COVID-19. And the boatload of free cash Pfizer is bringing in today could pave the way for even more long-term growth.

People ask questions at a business meeting.

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Citigroup: FCF of $56.9 billion

Major US financial institutions benefited from a more favorable outlook for the economy. Unlike the years immediately following the Great Recession of 2008, these institutions do not need to hold as much in reserve against potential credit losses. As a result, profitability is up for banks like Citigroup.

In the first nine months of 2021, Citigroup’s net income nearly tripled year over year, from $6.7 billion to $18.8 billion. And the company has recorded free cash of $56.9 billion over the past 12 months. Free cash flow has been a somewhat volatile metric for Citigroup; in three of the past five years it has been negative. But with interest rates set to rise this year and loan loss provisions likely to remain low, it looks like it’s in a good position to continue to perform well for the foreseeable future.

Its dividend at the current share price yields 3.1%. However, Citigroup has not increased its payouts since the start of the pandemic, so an increase may be overdue. Instead, management has opted for buybacks, repurchasing $7.5 billion worth of stock over the past three quarters.

But if the company continues to generate strong cash flow — and investors will know that soon enough, as it reports earnings later this week — it wouldn’t be surprising to see Citigroup at least modestly raise its dividend this year. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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