Dividend Plus? Let's talk about the most noteworthy free cash flow ETFs in the United States

Wallstreetcn
2025.02.11 02:39
portai
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There is a rich variety of free cash flow ETFs in the US stock market, each with its own strengths. If you value stability, you might consider VFLO and COWZ; if you pursue growth, you could look at COWG, GARP, and QGRW; if you want low fees, JQUA might be a good option

Recently, the A-share market has been a bit lively, with Huaxia Fund and Guotai Fund launching the first batch of domestic Free Cash Flow ETFs.

What is a Free Cash Flow ETF?

In simple terms, Free Cash Flow (FCF) is the "real cash" left over after a company deducts operating costs and capital expenditures. A Free Cash Flow ETF is a fund that packages together the stocks of companies with abundant free cash flow.

Why pay attention to Free Cash Flow?

  • More Authentic: Compared to net profit, free cash flow is harder to be "beautified" and better reflects the company's true operating condition.
  • More Resilient: Companies with more free cash flow are better able to cope with market fluctuations and are more likely to pay dividends!
  • Potential Stocks: Over the past decade, companies in the A-share market with high free cash flow returns have shown impressive stock price performance!

Are there similar ETFs in the US stock market?

Of course, and there are quite a few! In the book “The First Lesson of Global ETF Investment”, it specifically mentions the American company Pacer, whose "Cash Cow ETF" series is quite renowned, with COWZ being the most famous!

The secret of COWZ is to select the 100 companies with the highest free cash flow yield from the Russell 1000 Index. In 2022, while the US stock market plummeted, COWZ rose against the trend, demonstrating the power of the free cash flow strategy!

Which US Free Cash Flow ETF is the best?

Hold on, let me break it down for you! Bank of America recently released a research report specifically studying US Free Cash Flow ETFs, packed with information!

Highlights of Free Cash Flow ETFs in Bank of America's view:

  1. Strong Performance: Since 1999, Free Cash Flow ETFs have significantly outperformed the S&P 500 Index!
  2. Not Dependent on the "Magnificent Seven": Even without heavily investing in the "Magnificent Seven" (Amazon, Apple, Microsoft, Tesla, Google, NVIDIA, Meta), they can still outperform the market!
  3. Versatile Strategy: The free cash flow strategy can be used to select both defensive and growth companies.
  4. Various Metrics: In addition to free cash flow yield, you can also look at free cash flow profit margin, free cash flow growth rate, and other indicators.

Main US Free Cash Flow ETFs Comparison Listed by Bank of America:

In summary:

The variety of Free Cash Flow ETFs in the US stock market is rich, each with its own strengths. If you value stability, consider VFLO and COWZ; if you pursue growth, consider COWG, GARP, and QGRW; if you want low fees, consider JQUA

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