Slide Show | August 2012

See All Slide Shows   Page 1 of 11  

9 Cash-Rich Stocks to Buy Now

slideshow image

iStockphoto

You'll never be able to get a good feel for corporate health if you ignore the thing we're all in business to earn: cash. Without it, a business can't expand or attract investors. And it's not as easy to manipulate as the earnings figures produced under generally accepted accounting principles, or GAAP.

What really counts is free cash flow. Warren Buffett calls it "owner earnings," or money that is available to shareholders if the business chooses to distribute it. Having this cash on hand bolsters a company's financial strength, freeing it up to make acquisitions or attract investors with dividends or share buybacks. No single measure indicates healthy cash flow, but I look at whether free cash flow exceeds GAAP earnings by at least 10% -- in other words, the ratio of free cash flow to earnings (FCF/E) should be at least 1.1. (I use a three-year average.)

I recommend the following nine companies for good cash flow. (All prices and related data are as of market close on August 15; click on the ticker symbols for more recent information.)

9 Cash-Rich Stocks to Buy Now
Advertisement

Popular Slideshows


print / view as single page order a reprint
Advertisement
Advertisement
Get valuable updates from Kiplinger directly to your e-mail

Featured Videos From Kiplinger