#Free cash flow yield free#

The end goal of doing this is to weaken earnings in the short-term while expanding earnings later in the asset’s life as depreciation expense recognitions fall. For example, an accelerated depreciation accounting method can be used to recognize higher levels of depreciation expenses in the early lives of a company’s asset(s). Net income, while offering sufficient insight in a corporation’s profits, may be subject to levels of manipulation from accounting measurements eligible to be used in the financial statement preparation process.

1Ĭorporate Earnings Are Subject to Accounting Manipulations

#Free cash flow yield free#

With a federal funds rate of 5.25%, companies generating high levels of free cash flow may be less susceptible to interest rate risk due to being less reliant on debt markets to maintain business operations amidst the current period of elevated interest rates. Companies seeking to proactively expand market share in their respective industry may seek to acquire another firm. One way may be in the form of increasing shareholder yield through purchasing back common equity or by distributing a cash dividend. Having a high cash position leaves company leadership with additional flexibility into how they can continue to create value for their shareholders. However, the cash flow statement may offer a deeper level of insight into the current standing of a company’s financial health since it shows how much cash a business has on-hand to meet near and long-term obligations.Ĭorporate Flexibility Through Free Cash Flow Investors may utilize measurements from the income statement, such as net income, to determine how profitable a company is. Cash Flow Kings 100 ETF, can be a differentiator within the core of an equity portfolio by capturing U.S.-domiciled companies with the highest free cash flow yields.įree Cash Flow Can Offer Beneficial Insights into a Firm’s ProfitabilityĪ firm’s profitability can be measured in multiple ways.

Strategies that invest in companies based on their free cash flow yield may indirectly expose investors to other investment factors that may positively impact portfolio fundamentals.

Free cash flow as a profitability measurement can offer a level of insight into a company’s financial health and corporate flexibility.

Utilizing free cash flow (“FCF”) as this key profitability metric may prove useful as these companies offer potential corporate flexibility to drive returns for their investors in the near and long term.

In the current macroeconomic environment of elevated interest rates, investors may be re-evaluating the core components of their equity portfolios to try to obtain a potential edge relative to a strategy tracking a free-float market cap weighted equity index. companies exhibiting robust profitability characteristics. Cash Flow Kings 100 ETF (FLOW) to provide investors meaningful exposure to a portfolio of U.S.