3 Stocks to Buy With Impressive Cash-Flow Performance

  • Three select high cash flow stocks with a special allure offer stability, growth potential and attractive shareholder returns.
  • Meta Platforms (META): It posted $12.5 billion in free cash flow and a 34% cash flow margin likely to be strategically allocated.
  • Visa (V): It boasts a free cash flow margin of nearly 58% and has no credit card debt exposure while engaging in buybacks.
  • Altria Group (MO): It transforms its product line while prioritizing returns through buybacks and a generous 8.5% dividend yield.
high cash flow stocks - 3 Stocks to Buy With Impressive Cash-Flow Performance

Source: shutterstock.com/Monster Ztudio

Businesses aim to generate profit, so high cash flow stocks are proof of a company’s success in making profits by generating and holding significant cash reserves.

Organizations use substantial free cash to reduce debt, withstand downturns, reinvest in growth and reward shareholders through dividends and share buybacks.

Renowned investor Warren Buffett asserts that a company’s free cash flow is the most important valuation metric. It is unsurprising that Buffett invests in high-yield businesses like Apple (NASDAQ:AAPL).

While maintaining a strong balance sheet is prudent, cash alone does not define the best opportunity. Investors must consider what companies do with their cash.

Despite several firms excelling at generating cash flow, accumulating reserves amid high inflation represents an underutilization of resources. Though brief market volatility may warrant holding large reserves, shareholders expect ongoing reinvestment or remuneration over the long run to justify investing in high cash flow stocks.

So now, let’s examine three companies with impressive cash flows and market performance indicative of future growth.

Meta Platforms (META)

In this photo illustration the Meta logo seen displayed on a smartphone and in the background the Facebook logo
Source: rafapress / Shutterstock.com

Meta Platforms (NASDAQ:META), which owns Facebook, Instagram and WhatsApp, generates significant cash flow. Truly, it is worth consideration as one of the high cash flow stocks in which to invest.

In its latest earnings report, Meta Platforms posted $36.5 billion in revenue with $12.5 billion in free cash flow, yielding a healthy 34% cash flow margin. Also, the company maintains a strong balance sheet with $58.1 billion in total cash. Revenue climbed 27% year-over-year (YOY) as the company capitalized on a 7% increase in monthly active users. Over the past year, META expanded its cash and equivalents by 51% to $85 billion.

In addition to organic growth, Meta Platforms invests cash flow strategically. The company pays its first-ever dividend while allocating $50 billion to share repurchases. Both initiatives support the META stock price. Besides these moves, it reinvests heavily in artificial intelligence (AI). The company budgeted $40 billion for capital expenditures this year, up from an initial $35 billion target.

VISA (V)

several Visa branded credit cards
Source: Kikinunchi / Shutterstock.com

The world’s largest credit card company, Visa (NYSE:V) doesn’t need to use its own credit, as it has a free cash flow margin of almost 58%. Interestingly, Visa does not have significant exposure to credit card debt. It is typically up to the banks that partner with Visa to issue the cards.

Visa’s business model of charging a commission on third-party transactions means it functions more as a data network that doesn’t need large expenditures. The company operates as a payment authorization, clearing and settlement, and doesn’t extend credit to consumers by itself. In fact, it takes in more income from data processing than services ($4.03 billion compared to $4.26 billion in the last quarter).

The company has increased its EPS by 20%, with payment volume increasing 7% and net revenue at 10%. Notably, Visa engages in stock buybacks, ranging from $2.0 billion to $4.0 billion a quarter, helping boost Visa’s share price. No wonder analysts are bullish on Visa stock, giving it an average price target of $310.11 per share, a potential 16% upside.

Altria Group (MO)

Altria Group, Inc. (MO) logo of US producer and marketer of tobacco and cigarettes is seen on a mobile phone screen.
Source: viewimage / Shutterstock.com

Altria Group (NYSE:MO) is one of the largest tobacco companies in the U.S. and the owner of the iconic Marlboro brand. Cigarette popularity is declining, which may negatively impact the company’s future prospects. However, Altria Group is focusing on transforming its product line to smokeless options and enhancing returns for investors.

Notably, Altria Group is one of the high cash flow stocks that generates a lot of cash. The free cash flow margin rose by 60.3% and operating cash flow grew by 12% last year. The company utilizes its significant cash flows to benefit shareholders. It added $2.4 billion to its stock buyback program last quarter.

Moreover, Altria Group pays a generous dividend with a forward yield of 8.5%, well above the 1.3% average of the S&P 500 index. While MO’s stock price is not expected to increase rapidly and has remained flat for five years, its dividend provides consistent income, which is valuable for investors.

On the date of publication, Stavros Tousios 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.


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