In recent weeks I have been looking into things such as shareholder yield in addition to the basic dividend yield in order to find stocks that give tangible benefits back to shareholders.
What this basically boils down to is looking for companies that make loads of cash and give it back to shareholders via share repurchase programs or increasing dividends.
What does this mean?
This means that we must look for companies that have HUGE free cash flows!Â These companied typically have products or services that are needed by a lot of people and will likely have a patent or license for that product or service. (Think phamaceutical companies).
How do we Cash in?
Well, investopedia has a great article outlining their ideas for finding cash rich companies.
Investopedia suggests looking for companies with Free Cash Flow Margins of greater than 15%.
I would typically like to see this type of cashflow go back a few years in order to get a feel for the consistency and reliability of the cash flows.Â We all know that one good year does not mean the world in investing.Â This is especially true when we are talking about phamaceutical companies, one of which is outlined in the referenced article.
So, take into account my article on finding the best dividend stocks and after you narrow your search down from there, take a look at the free cash flow generated by each company. A look at my top posts will give you direction how to narrow down your search.
Remember, the name of the game is shareholder yield…you want to get paid one way or another for investing your hard earned money.