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Free cash flow yield

Yearly free cash flow divided by market capitalization. It shows how much cash the business generates for each dollar of its stock market value.

Simple example

A company worth $200 on the stock market produces $10 of free cash flow a year. Its free cash flow yield is $10 ÷ $200 = 5%.

Market cap $200$10 of free cash flow a year$10 ÷ $200 = 5% yield
Made-up numbers, for illustration only.

Related terms

Free cash flowOperating cash flow minus capital expenditures.Market capitalizationShare price times the number of shares.DividendsCash a company pays out to its shareholders.