5 Stocks With Ample Free Cash Flow

NEW YORK (TheStreet) -- Pfizer (PFE), Schlumberger (SLB) and Exxon Mobil (XOM) are among five health care and energy stocks we selected that have ample free cash flow. In addition, these companies have high dividend yields and strong cash balances, making them value picks for the long term.

Health care stocks suffered smaller gains than the broader market last week. For the week ended Aug., 5, the S&P 500 Healthcare Sector Index fell 5.2%, vs. a 6.8% drop for the S&P 500 index. The NYSE Healthcare Index fell 5.9% vs. a 7.7% decline on the NYSE Composite index.

Although energy companies have suffered losses, the energy stocks we selected are still value picks worth considering. Even with the economic gloom in the Europe and U.S., energy prices could still rise, boosted by demand for oil from China. The Bord Gáis Energy Index rose 2% in July.

The following stocks are expected to generate dividend yields ranging from 1% to 4% with free cash flow per share of 1% to 6%. Analysts expect these five stocks to rise from 18% to 57% over the coming year.

These stocks are listed in ascending order of free cash flow per share.

5. Pfizer is a global company that makes drugs and health care and nutrition products for humans and animals.

Pfizer reported second-quarter 2011 results last week. Revenue came in at $17 billion, excluding $214 million related to the sale of Capsugel to Kohlberg Kravis Roberts for $2.4 billion in cash. Net income for the quarter grew 5% to $2.6 billion, or 33 cents per share, compared to $2.5 billion, or 31 cents per share, in the year-ago quarter.

The company has said it plans to pay a third-quarter dividend of 20 cents a share on Sept. 6. The company has a current dividend yield of 3.66%.

The company's annual free cash flow per share is $1.24, while cash flow per share stands at $1.43.

For fiscal 2011, the company expects revenue to range from $65.2 billion to $67.2 billion, and diluted earnings per share to range between $1.09 and $1.24. For fiscal 2012, the company expects operating cash flow of $19 billion.

Of the 27 analysts covering the stock, 70% rate it a buy and 22% rate it a hold. On average, analysts surveyed by Bloomberg have a $23.86 12-month price target on the stock, which is about 43.2% greater than current levels.

4. Schlumberger is a leading oilfield services company.

Second-quarter 2011 revenue came in at $9.62 billion, compared to $5.94 billion in the same quarter of 2010. Net income for the quarter increased to $1.3 billion, or 98 cents per share, from $818 million, or 68 cents per share, in the year-ago quarter. At the end of the quarter, the company's WesternGeco unit had a backlog of approximately $824 million.

Schlumberger recently declared a quarterly cash dividend of 25 cents per share to shareholders of common stock, payable Oct. 3. The dividend payable as of June 30 was $336 million, compared to $289 million at the end of December. The company has a dividend yield of 1.06%.

Cash and short-term investments stood at $4.9 billion as of June 30. The company used liquidity for stock repurchases of $707 million and capital expenditures of $951 million during the quarter.

On an annual basis, free cash flow per share stood at $2.06, while cash flow per share was $4.40 for the year. For fiscal 2011, Schlumberger expects capital expenditures to reach $4.2 billion from $2.91 billion in fiscal 2010.

Of the 39 analysts covering the stock, 87% rate it a buy and 10% rate it a hold. On average, analysts surveyed by Bloomberg have a 12-month price target of $115.76 on the stock, which is 57.1% greater than current levels.

3. Exxon Mobil ( XOM) is a major explorer and producer of crude oil and natural gas.

Earnings for the second quarter of 2011 came in at $10.68 billion, or $2.18 per share, vs. $7.56 billion, or $1.60 per share, in the year-ago quarter. Gross revenue and other income increased to $125.5 billion from $92.5 billion in the comparable quarter last year.

The company recently declared a cash dividend of 47 cents per share for the third quarter, up 7% from the year-ago quarter and payable on Sept. 9. In the first half of 2011, the company distributed more than $14 billion to shareholders through dividends and share purchases to reduce outstanding shares. Currently, the company has a dividend yield of 2.2%.

For the second quarter, cash flow from operations and asset sales stood at $14.4 billion, compared to $9.7 billion in the prior-year quarter. Asset sales totaled $1.5 billion. For the first half of 2011, cash flow from operations and asset sales was $32.6 billion. Exxon's annual free cash flow per share was $4.41, while cash flow per share recorded a significant $9.91.

Of the 26 analysts covering the stock, 50% rate it a buy and 46% rate it a hold. The average 12-month price target of analysts surveyed by Bloomberg is $92.88, which is 32.3% greater than current levels.

2. Johnson & Johnson ( JNJ) is a large health care company, producing drugs, consumer health care products and medical devices.

Sales for the second quarter of 2011 came in at $16.6 billion, up 8.3% from the second quarter of 2010. Adjusted net earnings for the quarter rose to $3.5 billion, or $1.28 per diluted share, from $3.4 billion, or $1.21 per diluted share, in the same quarter prior year. For full-year 2011, the company has maintained its EPS guidance range of $4.90-$5.00.

The company recently declared a cash dividend of 57 cents per share on its common stock for the third quarter of 2011, payable Sept. 13. This is 5.6% greater than the year-ago quarterly dividend of 54 cents per share. Currently, the company has a dividend yield of 3.59%.

Free cash flow per share was $5.09 on an annual basis, while cash flow per share recorded was $5.96.

Of the 27 analysts covering the stock, 52% rate it a buy, and the rest rate it a hold. There are no sell ratings on the stock. The average 12-month price target of analysts surveyed by Bloomberg is $72.14, which is 18% greater than current levels.

1. Chevron ( CVX) is a major oil and gas company.

For the second quarter of 2011, Chevron recorded earnings of $7.7 billion, or $3.85 per diluted share, compared to $5.4 billion, or $2.70 per diluted share, in the year-ago quarter.

Led by higher crude oil and refined product prices, sales and other operating revenues increased to $67 billion from $51 billion in the same quarter a year earlier. Upstream and downstream earnings grew 51% and 7% during the quarter, respectively.

For the second quarter of 2011, the company's board declared a quarterly dividend of 78 cents per share, payable Sept. 12. The dividend is up 8% from the year-ago quarter. Chevron has a current dividend yield of 2.86%.

As of June 30, Chevron's cash and cash equivalents stood at $13.3 billion. For the second quarter, the company generated a record $10.7 billion in cash from operations. On an annual basis, free cash flow per share was $5.88, while cash flow per share came in at $15.70.

Of the 26 analysts covering the stock, 77% rate it a buy and the rest rate it a hold. There are no sell ratings on the stock. On average, analysts polled by Bloomberg have a $123.64 12-month price target on the stock, which is $37% greater than current levels.

>>To see these stocks in action, visit the 5 Stocks With Ample Free Cash Flow portfolio on Stockpickr.

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