Hi there, Fools. I’m back to highlight three businesses that generate oodles of cash flow.
Why? Because cash flow is used by management teams for various shareholder-friendly actions like doling out dynasty-building dividends; buying back stock at favorable prices; and expanding sales without having to take on new debt or issue shares.
Cash flow is the lifeblood of any business, so it only makes sense to invest in “cash machine” companies for long-term wealth.
Without further ado, let’s get to this week’s list.
Kicking things off is SNC-Lavalin Group (TSX:SNC), which has generated $185 million in trailing 12- month operating cash flow. Shares of the engineering and construction company are down 13% over the past year versus a gain of 9% for the S&P/TSX Capped Industrials Index.
To be sure, SNC isn’t exactly a conservative play. The stock hit new multi-year lows in October on a bunch of political issues, primarily tensions with Saudi Arabia, as well as fraud and corruption charges related to alleged dealings with the Moammar Gadhafi-led Libyan regime.
Of course, if you believe CEO Neil Bruce, who says that “business is solid” despite all the drama, SNC’s hefty cash flows and decent yield — currently at 2.5% — might be worth picking up.
Next up, we have Brookfield Property Partners, L.P. (TSX:BPY.UN)(Nasdaq:BPY), which has posted $1.8 billion in trailing 12-month operating cash flow. Shares of the real estate powerhouse are down 17% over the past year, while the S&P/TSX Capped Real Estate Index is up 3% during the same time frame.
The stock has slumped steadily over the past month, but it could be a great time to pounce. In Q3, net income increased to $722 million from $659 million in the year-ago period. More important, funds from operations — another key cash flow metric — clocked in at a solid $249 million. The strong results were driven by Brookfield’s blockbuster acquisition of GGP Inc. and improved same-property performance.
Currently, the stock boasts an especially fat dividend yield of 6.8%.
Rounding out our list is Gildan Activewear (TSX:GIL)(NYSE:GIL), which has generated trailing 12-month operating cash flow of $622 million. Shares of the apparel company are up 8% versus a 10% loss for the S&P/TSX Capped Consumer Discretionary Index.
The stock has performed solidly ever since Gildan reported its Q3 results in early November. During the quarter, adjusted EPS increased 7.5% to $0.57 as revenue grew 5.3% to $754.4 million. Moreover, operating expenses decreased a solid 7%.
Over just the past three years, Gildan’s stock buybacks and dividend payouts have grown 207% and 56%, respectively, suggesting that management is using its cash flow to benefit shareholders.
While Gildan isn’t dirt cheap, a P/E in the low-20s seems reasonable for such a high-quality, low-risk play.
The bottom line
There you have it, Fools: three cash cow businesses that you should definitely check out.
As always, don’t view them as formal recommendations. They’re simply ideas for further research. Even cash cows can be risky, so plenty of due diligence is still required.
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Brian Pacampara owns no position in any of the companies mentioned.