Cash Flow Focus: Thermo Fisher, Energy Transfer, and NetEase Companies with strong cash flow and a history of impressing Wall Street analysts may make excellent prospects for 2025; TMO, ET, and NTES are three to watch.

Investors focused on top-and-bottom-line performance—important as they are—do so at the risk of neglecting another crucial metric for companies across industries: cash flow. Put simply, without adequate cash flow, it becomes difficult for any company to sustain its operations, let alone continue to grow its business through expansion, innovation, or acquisitions.

Cash flow is also a key consideration for companies that pay dividends, as a strong and steady influx of cash helps to maintain and grow dividend payments over time.

Investors looking to enter new positions in 2025 with a focus on companies that have the stability of strong cash flow plus a vote of approval by Wall Street analysts might start their search with three firms: Thermo Fisher Scientific Inc. (NYSE: TMO), Energy Transfer LP (NYSE: ET), and NetEase Inc. (NASDAQ: NTES).

Thermo Fisher Scientific: Resilient Market Position, Stock Buybacks and Dividends

Thermo Fisher is a leader in the laboratory equipment industry, providing scientific instrumentation, reagents, consumables, and software services. Given its diverse sources of revenue linked to life sciences, data analytics, biopharmaceuticals, and more, the company appears to be strongly resilient to the vagaries of market cycles. Likewise, its role in the development of new healthcare products and medicines makes it well-positioned to benefit from an aging population with greater health needs in the years to come.

Thermo Fisher has a history of strong cash flow; in the third quarter of 2024, it reported about $1.9 billion in free cash flow. This has allowed the firm to engage in an aggressive stock buyback program that repurchased $1 billion worth of stock in December 2024, and to pay a dividend with a payout ratio of 9.8% and an annualized three-year growth rate of 14.5%.

Given these prospects, it's no surprise that 18 of the 22 analysts covering Thermo Fisher have rated it a Buy, projecting an upside potential of 13.3% as of January 23, 2025.

Energy Transfer: Major Expansion Contributing to Cash Flow Growth

Energy Transfer is a midstream energy company providing transport and other services throughout North America. ET shares have rallied by more than 51% in the year leading to January 23, 2025 on significant expansion projects such as the $2.7-billion Hugh Brinson pipeline. Between this and other projects that are likely to come online in the next two years, Energy Transfer appears poised for solid organic growth over the next several quarters. Besides that, anticipated increased oil and gas volumes this year could help to drive further earnings growth.

The company's distributable cash flow for the third quarter of 2024 was $2.6 billion, up about 5% from the prior-year quarter. Thanks to this, Energy Transfer enjoys an impressive 6.1% dividend yield and a three-year annualized dividend growth rate of 27.9%.

Ten of the 11 analysts covering Energy Transfer have assigned it a Buy rating, reflecting optimism about the company's prospects for strong organic growth and reliable dividends.

NetEase: A Corner on the Mobile Gaming Market and Substantial Cash Reserves

Chinese mobile video game developer and music streaming company NetEase has had a volatile year, though it is trading under 2% up as of January 23, 2025, relative to 12 months prior. The video game industry, in general, has a solid growth trajectory, with analysts anticipating 18% growth from 2024 to 2026 to a total industry size of $260 billion. NetEase plays a significant role in the gaming industry's mobile division. One of its latest releases, December 2024's Marvel Rivals, surged to about 640,000 concurrent users within the first month of its launch.

Besides strong top- and bottom-line performance for the latest quarter, NetEase impresses with about $17 billion in cash reserves driven by stable cash flow. This allows the firm to pay an annual dividend of $1.73 with a dividend yield of 1.8% and a payout ratio of 29.2%, which are likely to remain stable given its enviable cash position.

NetEase is rated a Moderate Buy, with six Buy ratings and one Hold. Analysts have given the company a consensus price target of $108.71, approximately 10% above its current level.