May 2021

Cash Flow Reigns King

Companies that can produce material amounts of free cash flow offer significant benefits to shareholders. But there is a key question to consider: has the free cash flow-producing capacity of companies changed over time?

One of the key drivers of value creation in the equity markets is a company’s ability to
consistently produce operating free cash flow. This excess cash can be used to pay dividends, make acquisitions, repurchase shares or be retained by the business to improve the quality of the balance sheet, and companies that can produce material amounts of free cash flow offer significant benefits to shareholders. But there is a key question to consider: has the free cash flow-producing capacity of companies changed over time?

Thomas D. Sargent, CFA®

Executive Vice President

FULL BIO