2 ASX Stocks With Rising Free Cash Flow to Watch in 2026

When investors look past headlines and market mood, one metric quietly reveals how strong a business really is: free cash flow. Unlike accounting profit, free cash flow shows how much real cash a company generates after paying for the assets it needs to keep operating. When this number improves, it often signals better discipline, stronger operations and more room to make long-term decisions without financial strain.

Two ASX-listed companies from very different sectors are showing signs of improving free cash flow. One operates in global energy markets, the other in domestic banking. Yet both tell a similar story about execution, balance sheet strength and flexibility.

Why free cash flow deserves attention

Free cash flow matters because it gives management options. Companies with rising free cash flow can reduce debt, invest in growth, absorb shocks or return capital to shareholders. In contrast, businesses that rely heavily on borrowing or equity raisings often lose strategic freedom.

In capital-intensive sectors like energy and regulated industries like banking, improving free cash flow can be a powerful signal that a company is moving into a more stable phase of its cycle.

Santos Ltd: Turning investment into cash generation

Santos Ltd is one of Australia’s largest energy producers, with assets across LNG, natural gas and oil. For several years, Santos has been in a heavy investment phase, funding large-scale projects designed to lift long-term production. That phase is now shifting.

From build phase to harvest phase

Major projects such as Barossa in northern Australia and Pikka in Alaska have absorbed significant capital. As these projects move from construction into production, the financial profile of the business changes. Capital expenditure falls, while operating cash inflows rise.

Barossa has already shipped its first LNG cargo, a key milestone that marks the start of revenue generation rather than cash outflow. Management has indicated that combined projects are expected to lift production meaningfully over the coming years, which helps spread fixed costs and supports stronger operating cash flow.

Evidence in recent cash flow data

Recent full-year disclosures showed Santos generating free cash flow of around US$1.8 billion, even in a period when energy prices were not particularly supportive. This outcome reflects disciplined cost control, steady production and the early contribution of new assets.

What stands out is not just the number, but the direction. Santos is transitioning from spending cash to creating it. That inflection often matters more than absolute levels because it changes how the business can be managed.

Why this shift matters

Improving free cash flow gives Santos several advantages:

1. It can reduce net debt or maintain conservative leverage through commodity cycles
2. It gains flexibility to fund future developments without stretching the balance sheet
3. It can support shareholder returns when conditions allow

For an energy producer exposed to volatile prices, cash flow strength acts as a buffer. It allows the company to stay disciplined even when markets swing.

Bendigo and Adelaide Bank Ltd: Steady cash flow in a complex sector

Bendigo and Adelaide Bank Ltd operates in a very different environment. Banking is heavily regulated, competitive and sensitive to interest rate movements. Yet cash flow remains central to a bank’s ability to invest, comply and reward shareholders.

Improving operating cash trends

Recent financial disclosures show that Bendigo and Adelaide Bank has recorded stronger operating cash flow compared with earlier periods. This improvement reflects a combination of stable net interest income, tighter cost control and disciplined balance sheet management.

In banking, cash flow is influenced by loan growth, deposit stability and operating efficiency. When operating cash improves, it suggests the core business is converting customer activity into usable cash more effectively.

Strategic actions supporting cash generation

The bank’s acquisition of the RACQ Bank loan and deposit portfolio expanded its customer base and funding pool. Over time, broader deposits can support more stable cash inflows, particularly when competition for funding intensifies.

At the same time, the bank continues to invest in technology and platform consolidation. While these investments require upfront spending, the long-term goal is lower operating costs per customer. If executed well, that efficiency feeds directly into stronger free cash flow.

It is also worth noting that the bank has faced regulatory and compliance challenges, which can temporarily weigh on sentiment. However, these issues do not negate the importance of underlying cash flow trends when assessing long-term resilience.

Why free cash flow matters for a bank

For Bendigo and Adelaide Bank, improving cash flow supports:

1. Investment in systems and compliance without stressing capital
2. Stability during periods of margin pressure or credit uncertainty
3. The sustainability of dividends over time

Banks do not grow in dramatic leaps. They compound steadily. Free cash flow is one of the clearest signals that the compounding engine is functioning as intended.

Different industries, similar signal

Santos and Bendigo and Adelaide Bank sit at opposite ends of the ASX. One sells energy into global markets, the other provides financial services domestically. Yet both show improving free cash flow driven by execution rather than favourable headlines.

1. Santos benefits from major projects moving into production and lowering capital intensity
2. Bendigo benefits from steady operations, portfolio expansion and efficiency initiatives

In both cases, cash flow improvement reduces reliance on external funding and increases strategic choice.

What investors should keep watching

Free cash flow trends matter most when they are sustainable. Key questions to monitor include:

1. Are Santos’s new projects delivering consistent volumes and cash margins?
2. Does Bendigo continue to balance investment spending with operating efficiency?
3. Are cash flows being used to strengthen balance sheets or fund value-accretive growth?

Answers to these questions help separate temporary improvements from lasting structural change.

Cash flow as the quiet foundation

Free cash flow rarely makes flashy headlines, but it quietly underpins long-term value creation. Companies that improve it gain resilience, optionality and credibility with investors.

For Santos Ltd and Bendigo and Adelaide Bank Ltd, improving free cash flow signals that each business is executing within its own context. One is emerging from a heavy investment cycle, the other is refining a steady banking model. Different paths, same destination: greater financial flexibility and a stronger foundation for the future.

Disclaimer:

General Financial Product Advice and Regulatory Framework: Pristine Gaze Pty Ltd (ABN 66 680 815 678, ACN 680 815 678) operates as Corporate Authorised Representative (CAR No. 001312049) of Alpha Securities Pty Ltd (AFSL 330757), which is licensed and regulated by the Australian Securities and Investments Commission under the Corporations Act 2001 (Cth). This report contains general financial product advice only and has been prepared without consideration of your personal objectives, financial situation, specific needs, circumstances, or investment experience. The information is not tailored to individual circumstances and may not be suitable for your particular situation. Before acting on any information contained herein, you should carefully consider its appropriateness having regard to your personal objectives, financial situation, and needs, and consider seeking personal financial advice from a qualified financial adviser who can assess your individual circumstances and provide tailored recommendations.

Investment Risks and Market Warnings: All investments carry significant risk, and different investment strategies may carry varying levels of risk exposure including total loss of invested capital. The value of investments and income derived from them can fluctuate significantly due to market conditions, economic factors, company-specific events, regulatory changes, commodity price volatility, currency fluctuations, interest rate movements, and other factors beyond our control. Securities markets are subject to market risk from general economic conditions and investor sentiment, liquidity risk affecting the ability to buy or sell securities at desired prices, credit risk from issuer default or deterioration, operational risk from inadequate internal processes, sector-specific risks including industry regulatory changes, technology obsolescence, management changes, competitive pressures, supply chain disruptions, and mining-specific risks including resource estimation uncertainty, operational hazards, environmental compliance, permitting delays, commodity price cycles, geopolitical factors affecting mining operations, and exploration risks. Small-cap and speculative mining stocks carry additional risks including limited liquidity, higher volatility, dependence on key personnel, limited operating history, uncertain cash flows, and potential failure to achieve commercial production.

Information Accuracy and Limitations: While we endeavour to ensure information accuracy and reliability, we make no representations or warranties (express or implied) regarding the accuracy, reliability, completeness, timeliness, or suitability of information provided, except where liability cannot be excluded under applicable law. This report may include information from third-party sources including company announcements, regulatory filings, research reports, market data providers, financial news services, and publicly available information, which we do not independently verify and for which we assume no responsibility. Past performance, examples, historical data, or projections are not indicative of future results, and no guarantee of future returns is provided or implied. To the maximum extent permitted by law, Pristine Gaze Pty Ltd and Alpha Securities Pty Ltd, together with their respective directors, officers, employees, representatives, and related entities, exclude all liability for any errors, omissions, inaccuracies, loss or damage (including direct, indirect, consequential, or special damages) arising from reliance on information provided, investment decisions made based on this report, market losses, opportunity costs, and technical issues or system failures.