Over 30% of money doing nothing

30% of money doing nothing

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors.

Dividends rose 4% last year to a record high of $404 billion, while companies cut back on capital spending by 3% to $885 billion. Capital spending is the cash companies put into new plants and equipment with the hopes of driving higher profits in the future.

Companies have also been pulling back from using cash to buy back their own stock. That is a maneuver that can reduce a company’s number of shares outstanding and in theory should make each share more valuable. Stock buybacks, net of new stock issuance, fell 7% to $269 billion

Apple shows the strong disconnect between big cash balances and stock returns. The company is sitting on more cash than any other, yet investors have lost $240 billion in paper profits since the stock peaked.

There’s only so much companies can do with their giant wads of cash. Facebook can use it to pay billions to buy things that aren’t worth anything.

IPO vs Sale


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