SPECIAL REPORT The Top 7 Stocks for 2024

7 Stocks With Rock-Solid Cash Flow to Ride Out Turbulent Times

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  • Check Point Software (CHKP): Cybersecurity giant CHKP thrives amidst rising digital threats, boasting a robust $1.05 billion free cash flow.
  • Chevron (CVX): Despite EV challenges, oil stalwart CVX stands resilient with a strong free cash flow recovery and $9.61 billion in ready cash.
  • Coca-Cola (KO): Economic shifts favor everyday essentials; KO’s consistent cash flow and $15.7 billion cash reserve prove its unbeatable market position.
  • Read more about these top stocks with strong cash flow!
Stocks with strong cash flow - 7 Stocks With Rock-Solid Cash Flow to Ride Out Turbulent Times

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While the experts may be putting on a smile ahead of possible economic challenges, investors should be prepared with quality stocks with strong cash flow. Sure, we’re all hoping for a soft landing. However, with mass layoffs still occurring and consumer sentiment and consumer sentiment in the dumps compared to pre-pandemic levels, it’s time to have an in-case-stuff-happens plan.

Further, many strategic benefits exist regarding defensive stocks with strong cash flows. First, enterprises that enjoy strong and consistent cash flows benefit from a liquidity buffer. If circumstances really get squirrely, these companies may enjoy greater insulation from the storm. Also, they benefit from operational flexibility without having to implement painful cuts or dip into dilutive fundraising.

In other words, these companies are the special teams of the equities sector, to use a football analogy. While all entities will likely take a beating during a market downcycle, some names will fare better than others because of their financial positioning. With that, below are stocks with strong cash flow to keep on your must-watch list.

Check Point Software (CHKP)

Cybersecurity Stocks To Buy: Check Point Software (CHKP)
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As a multinational provider of software and combined hardware and software products for information technology security, Check Point Software (NASDAQ:CHKP) represents one of the most relevant quality stocks with a strong cash flow to add to your portfolio. Admittedly, it’s a cynical argument: nefarious activity is only increasing. What’s more, the consequences of digital threats are incredibly severe.

In that sense, CHKP appears a no-brainer. Not only will the underlying business likely see increased demand, but it also enjoys robust cash flows. On a trailing 12-month basis, its free cash flow stands at $1.05 billion. That’s roughly in line with trends seen going back to 2017. Also, Check Point carries cash and cash equivalents of $1.59 billion, as of the second quarter of this year.

Even better, the company has no debt, thus benefitting from maximum flexibility. If that wasn’t enough, CHKP represents great value, trading at only 15.22x forward earnings. That’s favorably lower than the sector median of 26.11x.

Chevron (CVX)

Chevron (CVX) logo on gas station sign with "diesel" and "food mart" written underneath
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While Chevron (NYSE:CVX) might not seem the most relevant idea at this juncture due to its yesteryear hydrocarbon business, it’s well worth consideration for defensive stocks with strong cash flow. As an integrated oil giant, CVX probably won’t make you rich at this stage of its business cycle. However, if circumstances were to go rotten broadly, Chevron should weather the incoming storm.

Yes, electric vehicles impose a long-term credibility challenge against big oil, at least on paper. But as a CNBC report pointed out, EV inventory is piling up at dealerships. Also, geopolitical factors such as oil production cuts will spark upside pricing pressure on hydrocarbons. That’s going to favor Chevron and its multi-tiered exposure to the industry’s value chain.

On a TTM basis, the company features an FCF of $27.6 billion. That’s a nice recovery from the doldrums of 2020 when Chevron mustered FCF of only $1.66 billion. Also, Chevron enjoys $9.61 billion in cash and cash equivalents, meaning that it’s ready to take on future obstacles.

Coca-Cola (KO)

KO stock PEP stock: a can of Coca-cola and a can of Pepsi on either side of a glass of brown soda and sitting on top of a pile of ice
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As I’ve stated many times before, Coca-Cola (NYSE:KO) is poised to benefit from the trade-down effect. True, consumers may still be enjoying their pricey lattes at premium coffee shops. However, with layoffs on the rise, that activity might suffer a downturn. Also, keep in mind that companies are aggressively cracking the whip regarding return-to-office (RTO) protocols.

Given that the RTO folks will now have to suffer the morning commute and the associated costs, they’re going to need cheaper ways to acquire get-me-going-and-keep-going caffeinated products. On a pound-for-pound basis (including the convenience element), few avenues beat buying Coca-Cola products at the local grocery store.

If that wasn’t enough to consider KO as one of the defensive stocks with strong cash flow, then you should consider its FCF per share. On a TTM basis, this metric clocks in at 2.18X, just below 2022’s average of 2.19x. And that’s noticeably above the 2x posted in 2020. Finally, Coca-Cola commands $15.7 billion in cash and cash equivalents.

Olin (OLN)

Olin corporate office in Texas. OLN stock.
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Perhaps the most cynical idea on this list of quality stocks with strong cash flow, Olin (NYSE:OLN) primarily benefits from its reputation as a chemicals specialist. As a manufacturer of chlorine and sodium hydroxide, Olin isn’t exactly a sexy enterprise. However, it offers everyday in-the-background relevance that’s vital for infrastructural stability. Oh yeah, it also makes ammunition.

Through its Winchester brand, Olin serves a vast total addressable market. I don’t want to get into the politics of firearms and ammunition. Let’s just focus on the facts: there are more guns than people in the U.S. And thanks to the panic of Covid-19, that astonishing metric increased significantly from before the public health crisis.

Basically, that’s a lot of firearms that will require ammo consumption. So, I’m confident that while Olin’s FCF per share (TTM basis) of 7.5x is down from 2022’s print of 11.35x, it’s a trustworthy metric. Also, the company enjoys $161 million in cash. It’s simultaneously boring and controversial. However, it’s also built for the long haul.

Stellantis (STLA)

A flag with the logo for Stellantis waves outside a building with the logos for some of its car brands, including Abarth, Lancia, Fiat, Alfa Romeo and Jeep.
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Moving to another controversial idea but for different reasons, Stellantis (NYSE:STLA) is a top automotive manufacturer. Thanks to popular brands such as Dodge, Jeep, and Fiat, the company enjoys significant upside potential. However, the United Auto Workers (UAW) strike presently crimps market sentiment. In the trailing one-month period, STLA lost more than 2% of its equity value.

Further, the company also suffered noticeable impacts from the strike. For example, Stellantis canceled its scheduled appearance at the LA Auto Show. Also, it announced additional layoffs due to the pressure. Nevertheless, at some point, this headwind will pass. When it does, investors will focus on the underlying great value. Right now, shares trade at only 3.22x forward earnings.

But even if circumstances don’t go well for Stellantis and the economy, STLA is one of the quality stocks with a strong cash flow. On a TTM basis, the company’s FCF per share comes in at 4.92x, above the 3.66x seen in 2022. And while auto manufacturing is capital intensive, Stellantis enjoys cash and cash equivalents of $58 billion.

Dynex Capital (DX)

A laptop, pencil, pair of eyeglasses, and many coins rest on a wooden table.
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A financial services company, Dynex Capital (NYSE:DX) focuses on generating dividend income and long-term total returns through the financing of real estate assets. To be sure, DX symbolizes one of the riskiest ideas for stocks with strong cash flow. Just to reaffirm the point, since the beginning of the year, DX lost 18% of its equity value.

Still, one factor that might help intrigue speculators is its financial performance. In Q2 of this year, Dynex posted non-interest income of $64.9 million, well up from the $22.76 million generated in the year-ago period. Also, net income clocked in at $54.34 million, up from $29.34 million one year ago. Still, the company does need to keep this trend going, which isn’t guaranteed.

That said, Dynex is posting FCF (on a TTM basis) of $90.84 million. Also, it has cash and cash equivalents of $300.1 million while carrying zero debt on its books. Therefore, it enjoys incredible flexibility ahead of possibly lean times.

Encore Wire (WIRE)

A concept image of electricity flowing between two disconnected electric cables.
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Headquartered in McKinney, Texas, Encore Wire (NASDAQ:WIRE) is a manufacturer of a broad range of electrical building wires for interior wiring in commercial and industrial buildings, homes, apartments, and manufactured housing. Primarily, Encore produces and distributes copper and aluminum wire and cable products. While not exactly an exciting business, it’s understandably relevant. Further, investors recognize the opportunity, sending shares up over 27% on a year-to-date basis.

To be fair, if an economic downturn materializes, Encore could take a sizable hit. Already, on a TTM basis, its revenue is $2.75 billion, down from 2022’s haul of $3.02 billion. However, it’s also one of the quality stocks with strong cash flow. Notably, in the trailing year, its FCF per share stood at 30.64x. In 2022, this metric came in at 27.8x. Plus, Encore is cash-rich, enjoying a war chest of $668 million. In terms of long-term debt? Zero, which is the number you want to see ahead of a possible economic downcycle.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


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