Three Mega-Cap Firms Show Strong Cash Flow Performance

Strong cash flows underscore financial stability for companies, allowing them to reduce debt, seize growth opportunities, and distribute dividends to shareholders. Such companies are also better prepared to endure economic downturns, presenting a significant advantage for long-term investors.

Three mega-cap corporations—Verizon (VZ), Apple (AAPL), and NVIDIA (NVDA)—illustrate this positive trend effectively. Let’s examine how these companies fare in the current market environment.

Apple: The Cash King Continues to Reign

Apple has consistently generated substantial cash, providing multiple benefits such as enhanced dividend payouts. Notably, Apple has raised its quarterly dividend for 13 consecutive years, getting closer to the status of a Dividend Aristocrat.

Currently, shares yield a modest 0.5% annually, while the company’s five-year annualized dividend growth rate stands at an impressive 4.9%. For fiscal year 2024, Apple reported a remarkable free cash flow of $108.8 billion, with cash generation maintaining an upward trajectory.

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In its latest results, Apple posted an adjusted EPS of $2.40 and total sales of $124.3 billion, showing growth rates of 10% and 4% respectively. Both figures represent all-time highs for the company, with Services revenue hitting a record as well.

Below is a chart illustrating Apple’s quarterly sales over time.

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Verizon: A Consistent Payer

Verizon’s robust cash generation has made it a favorite among income-seeking investors, positioning the company on the brink of joining the esteemed group of Dividend Aristocrats due to years of increased payouts.

In fiscal year 2024, Verizon’s free cash flow reached $19.8 billion, marking a 6% increase year-over-year. Shares currently yield a substantial 6.2% annually, significantly surpassing the S&P 500’s yield.

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Recent quarterly results surpassed Zacks Consensus estimates for both EPS and sales. Growth in the customer base has contributed positively, with an expanding market share in broadband.

NVIDIA: Growth on All Fronts

NVIDIA showed impressive figures in its latest quarterly report, with sales climbing to $39.3 billion, a 78% increase year-over-year and a new record for the company. Adjusted EPS of $0.89 reflected a remarkable 71% growth compared to the previous year, also exceeding consensus estimates by nearly 6%.

This growth demonstrates strong demand, particularly evident in Data Center results, which grew by 90% year-over-year to reach $35.6 billion.

Below is a chart illustrating NVIDIA’s Data Center sales over recent quarters.

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Additionally, NVIDIA recorded free cash flow of $15.2 billion, a 40% increase from the same period last year, bolstered by high demand. The stock maintains a favorable Zacks Rank #2 (Buy), with analysts raising their EPS forecasts across the board in recent months.

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Conclusion

Companies with strong cash-generating capabilities can be excellent investment choices, as they possess the necessary cash flow to drive growth, return dividends to shareholders, and reduce debt. Importantly, such companies are also better equipped to overcome economic challenges, enhancing their appeal.

For those in search of reliable cash generators, Verizon (VZ), Apple (AAPL), and NVIDIA (NVDA) all meet this criterion effectively.

Zacks Highlights a Top Semiconductor Stock

This stock, although just 1/9,000th the size of NVIDIA, has seen more than an 800% increase since our recommendation. While NVIDIA remains a strong contender, our new top chip stock has significant growth potential ahead.

With robust earnings growth and an expanding customer base, it is poised to meet surging demand for Artificial Intelligence, Machine Learning, and Internet of Things technologies. The global semiconductor market is projected to expand dramatically, from $452 billion in 2021 to $803 billion by 2028.

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This article was originally published on Zacks Investment Research (zacks.com).

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