MCH Analysis · Research
Graph 10 of 10 · Week of 2 Oct 2026Valuation

Stock pay cuts the median free-cash-flow yield to 3.8%

Deducting stock-based compensation lowers the median free-cash-flow yield from 4.4% to 3.8% across 611 non-financial names. In Comm Services, stock pay equals 37% of free cash flow.

Statements through 31 Aug 2026; market cap 2026-07-31Universe 611 non-financial names
Median FCF yield after SBC
3.8%
4.4% before deducting stock pay
SBC as share of aggregate FCF
16%
sum of SBC over sum of FCF, all sectors
Negative FCF after SBC
61
names, vs 56 before deducting SBC
Highest SBC share of FCF
Comm Services
37% of the sector's aggregate FCF

Free-cash-flow yield before and after stock pay

Median by sector, % of market cap; ordered by the after-SBC yield

Source MCH research warehouse, quarterly statements (Alpha Vantage, as restated)
Dashed line = book median after SBC (3.8%). Number of names in brackets. The two medians are taken separately, so in small sectors the distance between the dots can exceed the typical name's SBC yield.
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What it means · inference

  • Reported free-cash-flow yields overstate what owners earn
  • Owners pay through dilution or offsetting buybacks
  • Comm Services and Discretionary look most flattered

For investors · general, not personal financial advice

  • Yields after stock pay give the fairer comparison
  • Share-count growth reveals the true cost
  • 61 names have negative cash flow after stock pay

What would change it

  • Stock pay falling relative to cash flow
  • Share counts rising after price falls, despite lower dollars

Method

  • What is measured: Trailing-four-quarter free cash flow (operating cash flow minus capital expenditure) over market cap, before and after stock-based compensation, median by GICS sector; 611 reader-safe non-financial names, latest reported quarter per name (June 2026 for 85% of names), market cap at 31 Jul 2026.
  • FCF = trailing-four-quarter operating cash flow minus capital expenditure (Alpha Vantage reports capex as a positive outflow; checked on several names). SBC = trailing-four-quarter stock-based compensation from the cash-flow statement.
  • Where quarterly SBC is incomplete, the latest annual SBC is used if that fiscal year ended within 15 months (31 names).
  • Market cap = factor-score market cap at 2026-07-31, or close x latest reported shares where the factor score is missing. Financials excluded: bank and insurer operating cash flow includes lending and deposit flows, so FCF is not meaningful.
  • Guard against unit errors: names with an absolute FCF yield above 50%, an SBC yield above 25% or negative SBC are dropped.

Sources

  • MCH research warehouse, quarterly statements (Alpha Vantage, as restated).
  • MCH research warehouse, monthly factor scores (trailing earnings yield, market cap).

Universe

Names in the published feed886
Excluded: held, suspended, withdrawn, deferred, deal-pending or pending review58
Reader-safe universe828
Excluded: Financials (FCF not meaningful)131
Dropped: incomplete four-quarter cash flow or no market cap4
Dropped: no stock-based compensation reported69
Dropped: absurd values (possible unit errors)13
Used in this exhibit611

Names whose rating is held, suspended, withdrawn, deferred or under a pending deal are excluded from every exhibit, so no held output appears here.

General and impersonal investment research. Not personal financial advice. Forecasts, valuations and model outputs are estimates and may be wrong. See Investment Disclaimer.

MCH Analysis is a general investment-research publication of MCH Advisory (Pty) Ltd. It is not personal financial advice and does not take your circumstances into account. MCH is not a licensed financial services provider or a registered investment adviser. Past performance, whether actual or simulated, does not predict future results. Subscriber Agreement | Privacy and Cookie Notice | Research Governance Policies