The S&P Quality FCF Aristocrats® Indices were launched to track companies that demonstrate consistent and efficient free cash flow (FCF) generation. The S&P 500® Quality FCF Aristocrats Index was launched in September 2024, followed by the S&P MidCap 400® Quality FCF Aristocrats Index and S&P SmallCap 600® Quality FCF Aristocrats Index in July 2025, thereby providing comprehensive coverage of the U.S. market.
Together, these indices offer a framework for identifying high quality and resilient businesses across the market-cap spectrum. By emphasizing consistent fundamental strength, the S&P Quality FCF Aristocrats Indices seek to identify companies that are likely positioned to deliver lasting shareholder value.
1. What is the goal of the S&P Quality FCF Aristocrats Indices?
The S&P Quality FCF Aristocrats Indices track high-quality companies distinguished by strong and consistent FCF generation. To qualify under the index methodology, companies must demonstrate a minimum number of consecutive years of positive FCF, alongside high FCF margins and FCF return on invested capital (ROIC). By emphasizing both consistency and efficiency in FCF generation, the indices highlight companies that are likely better positioned to withstand challenging macroeconomic conditions while positioned for long-term growth.
2. How can FCF be utilized to assess company quality?
FCF can serve as an indicator of company quality as it reflects the cash a business generates after covering its operational expenses and capital investments. FCF offers a view of a company’s capacity to sustain operations, pursue growth opportunities, pay cash dividends, repurchase stock or reduce debt. As such, FCF has the potential to highlight companies that generate value for shareholders and perhaps provide a buffer during economic downturns.
3. What makes FCF a valuable metric for identifying high-quality mid- and small-cap companies?
FCF can be an especially valuable measure of quality in mid- and small-cap companies, where earnings are often more volatile and financial transparency may be limited. Strong and consistent FCF helps identify businesses with maintainable growth potential while offering potential downside protection. Moreover, since mid- and small-cap companies are often viewed as riskier than large caps—due to their higher cost of capital and sensitivity to the business cycle—strong and consistent FCF becomes an indicator of resilience.
4. How do these indices work?
To qualify for inclusion under the applicable index methodology, companies must first pass an FCF screen, which requires a minimum number of consecutive years of positive FCF. For the S&P 500 Quality FCF Aristocrats Index, this requirement is 10 consecutive years, while the S&P MidCap 400 and SmallCap 600 versions require 7 years. From this pool, the top constituents are selected using an FCF score, which is based on the average of their five-year FCF margin and five-year FCF ROIC. Additionally, constituents are weighted according to their float market cap (FMC) and FCF score, with maximum stock and sector weights of 5% and 40%, respectively. The indices are rebalanced twice a year, in April and October. For more information, please see the full methodology available here: S&P Quality FCF Aristocrats Methodology
