Investors may wonder why General Motors (GM) is a top holding in the VictoryShares Free Cash Flow ETF (VFLO ) as of April 30, 2025. To answer this, it’s important to understand the relationship between free cash flow (FCF) and stock buybacks.
VFLO provides exposure to companies with high FCF yields, which can indicate operating efficiency and quality within a business. FCF is an attractive metric for evaluating investment opportunities as it can measure a company’s health. It is the remaining cash a company has after covering all expenses. FCF can be used to invest in growing the business, pay dividends, or pay down debt.
On the surface, GM has improved its business. “The number of cars required for profitability has dropped substantially,” Michael Mack, client portfolio manager for Victory Capital, told VettaFi.
GM has also been very active with share repurchases. “There’s a direct link between free cash flow yield and the amount of stock you can buy back,” Mack noted.
The Relationship Between FCF Yield & Stock Buybacks
GM currently has half the number of shares outstanding as it did a decade ago. This means earnings per share is twice what it would have been if the company did not repurchase shares, according to Mack.
“They are able to take their cash flow and earnings and use it to buy back a huge part of their stock,” Mack explained. “When you think of free cash flow yield, the higher it is, the more of it as an overall percentage of your company you can devote to buy back stock. For example, if you have a 10% yield, you can buy back 10% of your stock.”
GM has announced $16 billion in stock buyback programs since 2023, retiring more than 1 billion outstanding shares. This has resulted in fewer than 1 billion shares outstanding as of the end of 2024.1
GM announced on February 26, 2025, a $6 billion stock repurchase program. As part of an accelerated share repurchase program, $2 billion in share repurchases are expected to be completed during the second quarter of 2025.
For more news, information, and analysis, visit the Free Cash Flow Channel
VettaFi LLC (“VettaFi”) is the index provider for VFLO, for which it receives an index licensing fee. However, VFLO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VFLO.
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The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. The securities highlighted, if any, were not intended as individual investment advice.
All investing involves risk, including the potential loss of principal. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. ETFs may trade at a premium or discount to their net asset value. Redemptions are limited, and commissions are often charged on each trade. ETFs may trade at a premium or discount to their net asset value. The ETF invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the ETF may diverge from that of the Index.
Additional Information
Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions The ETF could also be affected by company-specific factors that could jeopardize the generation of free cash flow. The value of your investment is also subject to geopolitical risks such as wars, terrorism, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies.
The Victory U.S. Large Cap Free Cash Flow Index aims to select high quality companies from its starting universe by applying profitability screens. It then selects companies with the strongest free cash flow yield that exhibit higher growth. The Index is rebalanced and reconstituted quarterly. This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month FCF and next 12-month forward free cash flow. Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization.
VictoryShares ETFs distributed by Victory Capital Services, Inc.
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