The VictoryShares Free Cash Flow ETF (VFLO) has outrun Vanguard’s S&P 500 fund so far in 2026, returning 17.77% against 9.97% for VOO. Its edge comes from screening companies on both trailing and forecast free cash flow rather than accounting earnings.
A free-cash-flow strategy has quietly stayed ahead of the broad U.S. market this year. From Dec. 31, 2025 through July 1, 2026, the VictoryShares Free Cash Flow ETF (VFLO) delivered a 17.77% cumulative total return, beating the 9.97% return from the Vanguard S&P 500 ETF (VOO) over the same window, according to testfolio.io. That is a short stretch, and consistently beating the S&P 500 over long horizons stays difficult.
The backdrop matters. The S&P 500’s free cash flow yield has fallen below 2%, near its lowest level in decades, partly because several Magnificent Seven hyperscalers now spend hundreds of billions of dollars annually on the AI buildout — data centers, chips, networking gear, and power. VFLO instead targets companies still generating abundant cash.
How the screen works
VFLO is a passive fund tracking the Victory U.S. Large Cap Free Cash Flow Index. Rather than lean only on trailing figures, the index averages a company’s trailing 12-month free cash flow with analysts’ consensus estimates for the next 12 months to reach what it calls expected free cash flow.
From there it divides that figure by enterprise value rather than market capitalization, then takes the roughly 75 names with the highest yields and keeps the 50 with the strongest growth scores. The result lands in Morningstar’s mid-cap value box.
The cost of selectivity
That approach is not cheap. VFLO charges a 0.39% expense ratio, versus 0.03% for VOO, so it has to earn the premium. Income is not the point either. The fund carries a 30-day SEC yield of roughly 1%, and cash can go to buybacks, acquisitions, debt reduction, or reinvestment.
The edge is not limited to this year. Over the period from the fund’s June 2023 inception through July 1, 2026, VFLO produced a 93.21% cumulative total return against 77.77% for VOO, with a higher Sharpe ratio of 1.17 versus 1.06. Even so, roughly three years is a single market regime, not a full cycle, and past performance never guarantees future results.
Source: 24/7 Wall St.
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