In business, cash is king. The companies with the best cash flows are often the ones that are able to achieve the best returns for their investors. Unsurprisingly, the list of the most cash-generative companies in the world is dominated by big tobacco and big pharma.

In particular, the list is topped by Philip Morris International (PM 0.59%), which has converted approximately 29% of net revenues to free cash flow during the past five years. It is followed closely by Pfizer (PFE -0.61%) (26%) and Johnson & Johnson (JNJ 0.59%) (20%). McDonald's (MCD 0.33%) also sits in the top 10, converting 16% of revenues to free cash flow during the past five years. As a quick comparison, according to the U.S. Commerce Department, U.S. corporations currently report an average profit margin of 9.3%. The average margin since 1952 has been 5.9  %.

Why is this important?
According to Investopedia, free cash flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. It is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends, and reduce debt.

Revealing figures
 It's easy to see how these impressive free cash flow metrics impact shareholders. During the five-year period between 2008 and January 2014, McDonald's increased its dividend payout to investors by 116%. Meanwhile, Philip Morris increased its payout 104.3% and Johnson & Johnson increased its payout 43.5%. All of these payout increases were far above inflation, which is usually considered the benchmark for dividend growth.

Unfortunately, according to my data, Pfizer's payout dropped by 18.8% during this period. The company has ramped up share repurchases to compensate, however. Specifically, Pfizer has repurchased 19.4% of its shares outstanding since 2008. Still, this figure pales in comparison to Philip Morris, which has repurchased 26.4% of its outstanding shares during the past five years. McDonalds and Johnson & Johnson have repurchased 21.4% and 15.1% of their outstanding shares, respectively .

Of course, all these numbers, though impressive, do not reveal the true story. What investors like me and you really want to know is how much money do we get, and will it continue?

Show me the money
To find out how much cash is actually returned to investors, I'm going to crunch the numbers for the last four quarters of available data to try and figure out how much cash is being returned to investors as a percentage of the share price. Secondly, I'll look at how well these returns are covered by cash flow to establish whether or not they can continue.

Company

McDonald's

Philip Morris

Pfizer

Johnson & Johnson

Buybacks

$2

$6

$15

$1

Dividends

$3.1

$6

$7

$7

Total returned

$5

$12

$22

$8

Cash generated from operations

$7.3

$10

$20

$18

Dollar value retuned per share

$5

$7.5

$2.7

$2.8

Return based on current share price

5.3%

9.2%

8.3%

3%

Figures taken over the previous four quarters. Source: Marketwatch.com. Figures in billions except per-share amounts. Figures rounded to the nearest billion.

From the figures above, we can see that McDonald's returned a total of $5 billion to investors during the last four quarters; this was easily covered by the company's $7.3 billion in cash generated from operations. The same is true for Johnson & Johnson. However, both Pfizer and Philip Morris have returned, in aggregate, $2 billion more to investors over the last four quarters than they have generated from operations. For the most part, this additional payout has been funded with debt.

Still, Philip Morris and Pfizer both have robust balance sheets. This implies that these lofty returns will continue.

Foolish summary
Not only is cash conversion as a percentage of revenue an important metric to asses business profitability, but it is also helpful in determining how much cash investors will receive from the business.

Philip Morris, Johnson & Johnson, McDonald's, and Pfizer are all cash flow kings with some of the best cash conversion ratios in the business. Each of these four companies generates healthy free cash flow, most of which is returned to investors, and it would appear that this is set to continue.