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3 Growth Stocks That Have Generated $179 Billion in Free Cash Flow in 12 Months

By David Jagielski – Jan 12, 2022 at 8:34AM

Key Points

  • Apple, one of the best cash-generating businesses in the world, has accumulated more than $90 billion in free cash in just one year.
  • Pfizer's COVID-19 vaccine sales have provided it with a cash windfall.
  • After a year of solid performance, the time may be ripe for Citigroup to finally boost its dividend again.

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These businesses are in great positions to raise their dividends, buy back shares, or grow their operations.

One number that may be even more important than revenue or profit is a business's free cash flow (FCF). That metric measures the operating cash flow that's left after a company covers its operating and capital expenses. If it's positive, that's an excellent sign that the business is growing at a sustainable rate and could potentially fund more growth in the future.

Three businesses that are reporting tens of billions of dollars in free cash flow annually are Apple (AAPL -1.02%), Pfizer (PFE -0.35%), and Citigroup (C 0.11%). They're great businesses to invest in for the long haul, and they could be safe buys even if the economy faces headwinds in 2022.

Investor checking stocks on their phone.

Image source: Getty Images.

Apple: FCF of $93 billion

Tech giant Apple is the king when it comes to cash flow. Combine high-priced products and a loyal fan base, and you've got yourself a high-performing business. This diverse company has many ways to grow its business -- from iPhones to iPads to Apple Music to its Apple TV+ streaming video service.

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

While Apple has plenty of room to boost its dividend, which at current share prices yields a modest 0.51% (versus the S&P 500's average yield of 1.3%), management prefers to reward investors through share buybacks. Its repurchases totaled $86 billion in the past four quarters.

Apple is a cash-generating beast, and one of the safest stocks investors can own today. The piles of money that it is bringing in give it no shortage of options for long-term growth. And with the company coming off a record fiscal 2021 during which sales grew 33% to $365.8 billion, its operations have never been in better shape.

Doctor giving a patient medication.

Image source: Getty Images.

Pfizer: FCF of $29.2 billion

Sales of its COVID-19 vaccine have provided a windfall of cash 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 surged to $29.2 billion.

Pfizer's dividend yields an above-average 2.9% at current share prices, and the company hiked its quarterly payouts this year by 2.6%, from $0.39 to $0.40. However, the modestness of that hike suggests that management might have other plans for its cash, such as acquisitions.

Last month, it announced an all-cash $6.7 billion deal to purchase Arena Pharmaceuticals, a clinical-stage healthcare company that focuses on immuno-inflammatory diseases. This could boost Pfizer's pipeline and help lead to greater long-term growth.

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

Through the first nine months of 2021, Pfizer's revenue grew by 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 Comirnaty sales, as well as sales of Paxlovid, its oral COVID-19 treatment. And the boatload of free cash that Pfizer is bringing in today could set up its path for even more long-term growth.

People asking questions at a business meeting.

Image source: Getty Images.

Citigroup: FCF of $56.9 billion

Large U.S. financial institutions have benefited from a more favorable outlook for the economy. Unlike the immediate years following the Great Recession in 2008, these institutions don't need to hold quite as much in reserve against potential credit losses. As a result, profitability is up for banks like Citigroup.

Over 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 in 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 credit loss provisions likely to remain low, it looks like it's in a good position to continue performing well for the foreseeable future.

Its dividend at current share prices yields 3.1%. However, Citigroup hasn't boosted its payouts since before the pandemic began, so an increase may be overdue. Instead, management has opted for buybacks, repurchasing $7.5 billion worth of shares over the past three quarters.

But if the business continues generating strong cash flow -- and investors will find out soon enough if that's the case, as it posts earnings later this week -- it wouldn't be a surprise to see Citigroup at least modestly boost its dividend this year.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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