This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Bargain Stocks With Top Free Cash Flow Yields

Stocks in this article: GMEXRXETFCPRU

NEW YORK ( Stockpickr) -- In the past few years, we've read countless reports about the still-struggling U.S. consumer. Hopes are rising that 2013 will be a better year for consumers, but we're not exactly on the cusp of a truly healthy consumer economy where all people feel a greater sense of financial well-being.

In corporate America, it's an entirely different story. By many measures, a wide range of companies are generating near-record profit margins, and cash continues to pile up on corporate balance sheets.

>>4 Loser Stocks Poised for a Comeback in 2013

To be sure, many stocks have surged in value in recent years and aren't necessarily deep bargains in the context of their cash flow prowess. However, there are a handful of stocks in the S&P that produce prodigious amounts of free cash flow (defined as operating cash flow minus capital spending) yet have a market value that is still quite low in relation to that cash flow.

Here are four stocks that sport free cash flow yields (which is free cash flow divided by market value) in excess of 7%.

>>5 Rocket Stocks Ready for Blastoff

Xerox

This office equipment maker could have been a candidate for the trash heap by now, were it not for savvy moves to shore up its balance sheet and a game-changing acquisition. Xerox (XRX) acquired business services company Affiliated Computer Services in 2009, and that move is now paying off handsomely.

How do we know? Because Xerox has now become a veritable cash cow, churning out impressive amounts of free cash flow. Over the past four years, Xerox has generated a cumulative $6.8 billion in free cash flow, or roughly $1.7 billion per annum. The entire company is valued at just $10 billion, which equates to a free cash flow yield of 17%. That's almost hard to fathom at a time when most other companies sport free cash flow yields in the 3% to 4% range.

To take advantage of the low valuation assigned to its shares, Xerox bought back more than $1 billion in shares in 2012, and will likely keep shrinking the supply of stock.

E*Trade

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs