Welcome back to the world of the Cash Kings, where we highlight businesses that generate a healthy dose of free cash flow. Why is cash flow so important? Because it gives management the opportunity to boost shareholder value through actions like:

  1. Paying dynasty-building dividends,
  2. Buying back shares at attractive prices, and
  3. Growing business organically without having to borrow money or sell shares.

A Fool's guide to free cash
Investing, after all, is about putting money up front today in order to get more of it in return tomorrow. Here at the Fool, we're firm believers that free cash flow, as opposed to traditional accounting earnings, is the best gauge of a firm's health and profitability (or lack thereof).

So, with these cash flow lessons deeply engrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three more cash-flow rulers of our Motley Fool CAPS kingdom.

Unlike Canadian Solar -- a cash-burning company that CAPS Fools overwhelmingly dislike -- these businesses boast free cash flow-to-sales margins 15% and above (also known as the Cash King Margin), and they've won the bullish support of our community.

Sound the trumpets! Here's another trio of Cash Kings from CAPS:


Trailing-12-Month Cash King Margin

CAPS Rating
(out of 5)

Linear Technology (Nasdaq: LLTC)



Philip Morris International (NYSE: PM)



Western Union (NYSE: WU)



As always, don't consider these stocks as formal picks but rather as suggestions worth further investigation. After all, due diligence is the Fool's way to riches.

For starters, here's a quick summary of these cash-throwing kings, and what some of their loyal CAPS followers think about them. 

Circuit sultan
With an impressive free cash flow-to-sales margin of more than 30%, Linear Tech takes the honors as this week's most prolific cash king.

As one of the leading suppliers of high-end linear integrated circuits, Linear Tech keeps its fortress flush with cash via superior chip design and performance, disciplined focus on high-margin contracts (as opposed to higher growth, less-profitable rivals like Maxim Integrated (Nasdaq: MXIM)), and geographic diversity (more than 70% of its sales originate outside the U.S.).

CAPS member reeshau touches on what makes the company different:

Although Linear suffers from cyclical business effects, its products are very different from the commodity-level flash memory chips. Analog chip makers are often bunched with the rest of the semiconductor industry, but they are a smaller, defensible niche. Linear has one of the best positions in this niche, with high ROIC and margins.

Holy smokes
The next cash flow monarch on our list is Philip Morris, the world's second-largest tobacco company, behind only China National Tobacco.

For years, Philip Morris has provided wealth-building dividends and buybacks for shareholders using the stable nature of its business model and iconic megabrands like Marlboro, Virginia Slims, and Parliament to beat the likes of Imperial Tobacco and British American Tobacco (NYSE: BTI) in market share.

Earlier this year, CAPS All-Star mrindependent couldn't deny Philip Morris' profit prowess:

Although I personally despise cigarettes, I cannot argue with the fact that selling them is an easy way to make money -- especially overseas. I think now is a good time to load up on dividend stocks and this company sports a 5% dividend yield. Philip Morris has demonstrated continued growth throughout the economic downturn and I don't expect anything to derail it soon. 

Transfer tycoon
Our last free cash flow ruler this week is Western Union, the world's largest money transfer company. 

Western Union's massive international scale, which allows it to post operating margins that are as much as double that of rivals like MoneyGram International (NYSE: MGI) and Global Payments (NYSE: GPN)); low capital reinvestment requirements; and strong immigration growth trends should continue to drive significant dividend increases and share buybacks for this king.

CAPS member dudemonkey gives us the business model in a nutshell:

You go to [Western Union] and give them money. They then turn around and give someone else LESS MONEY. Multiply that by [400,000] locations worldwide and you'll see why I like this business. It's got a great brand (ask 10 people to name 1 other way to send money internationally), over a century-long track record of innovation, and they are paying down the debt they were saddled with after being spun off of First Data. 

The Foolish bottom line
Free cash flow-generating companies like Linear Tech, Western Union, and Philip Morris are always among my top candidates to research further. Our Motley Fool CAPS intelligence database is a great place to look for your own Cash Kings or read how your fellow Fools feel about thousands of different stocks.

Click here to join the forward-thinking CAPS community free of charge.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Linear Tech and Western Union are Motley Fool Stock Advisor picks. Western Union is also an Inside Value choice, and Motley Fool Options has recommended writing covered calls on it. Philip Morris is a Global Gains choice. The Fool's disclosure policy is the strict set of rules that always rules Fools.