As one of the shortlisted stocks to watch, XOM stock price traded at $103.01 as of 11:43 AM EDT.

Let’s face it: finding stocks may be challenging, especially with the variety of possibilities available. Concentrating on stocks with robust free cash flow is one method for weeding out rotten apples.

However, What Exactly Is Free Cash Flow and Why Is It So Crucial?

Free cash flow, in its most basic definition, is the amount of money left over after operational and capital expenses have been met. More expansion opportunities, more potential for share buybacks, regular dividend payments, and an easier ability to pay down debt are all made possible by high free cash flow. 

In their most recent quarterly reports, Exxon Mobil (NYSE:XOM), Microsoft (NASDAQ:MSFT), and Pfizer (NYSE:PFE) all reported excellent free cash flow.

Stocks to Watch

Exxon Mobil

Exxon Mobil has greatly benefited from rising energy prices in 2022, which has led analysts to increase their earnings forecast dramatically and move the stock into a highly-favorable Zacks Rank #2. (Buy). In its most recent earnings report, XOM announced a staggering $17.3 billion in quarterly free cash flow, representing a significant 60% sequential rise and a staggering 151% year-over-year gain. With a sustainable payout ratio of 36% of earnings and a high annual dividend yield of 3.6%, the company generously rewards its shareholders.

Pfizer

In its most recent announcement, Pfizer (NYSE:PFE), a giant in the Zacks Medical Sector, posted a strong $7.4 billion in quarterly free cash flow, indicating a heartening 26% sequential increase. The company’s dividend payout has also increased five times over the past five years, and its five-year annualized dividend growth rate is a strong 4.4%.

Microsoft

One of the S&P 500’s largest cash-generating generators is Microsoft, a mega-cap tech giant. In its most recent quarter, Microsoft (NASDAQ:MSFT) reported a staggering $17.8 billion in free cash flow, an increase of about 10% year over year. In addition to having exposure to the technology industry, MSFT It pays out an annual dividend yielding 1%, which is considerably above the 0.9% average for the Computer and Technology Sector as reported by Zacks Investment Research. While many tech stocks in 2022 suffered due to a hawkish Federal Reserve, MSFT is still expected to expand at a strong rate; earnings are projected to increase by 9.2% in FY23 and another double-digit 16% in FY24. 

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For investors wanting to choose companies with good free cash flow, Exxon Mobil (NYSE:XOM), Microsoft (NASDAQ:MSFT), and Pfizer (NYSE:PFE) are all solid places to start. 

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