Corporates’ Cash Pile Rises To $1.68T

Cash holdings were up 1.8% from the year prior, with the technology sector accounting for a record 46% of total cash in 2015.
Katie Kuehner-HebertMay 20, 2016

The corporate sector is sitting on an even larger pile of cash, according to Moody’s Investors Services.

U.S. non-financial companies rated by Moody’s held $1.68 trillion in cash at the end of 2015, up 1.8% from $1.65 trillion the year prior, the rating agency said Friday. The top 50 holders of cash account for $1.14 trillion of the total cash pile, and entry to the top 50 list now requires $6.12 billion in cash.

The technology, healthcare/pharmaceuticals, consumer products, and energy sectors continue to be the most cash-heavy, holding at year-end a record $1.3 trillion, or 77% of total corporate cash. The four sectors have accounted for more than 72% of the total every year since 2007.

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The top five cash holders are Apple, Microsoft, Google, Cisco Systems, and Oracle. Apple, which has been the “cash king” since 2009, held $215.7 billion in total cash for the period.

“While the concentration of cash among the top-rated cash holders continues to grow, so too has the portion held by the technology sector, which accounts for a record 46% of total cash in 2015, up from 41% in 2014,” Moody’s senior vice president Richard Lane said in a news release.

The tech sector’s cash holdings should rise even higher over the next year because of its strong cash flow, despite higher returns of capital to shareholders. The sector generated 63% of total free cash flow in 2015, up from 37% in 2007.

For the top 50 non-financial companies, capital spending fell by 3% to $885 billion, and net share buybacks fell 7% to $269 billion. Dividends increased by 4% to a record high of $404 billion while acquisition spending increased 43% to a record $401 billion.

“Investors are eyeing companies’ growing cash piles as potential sources of dividend increases to maintain fat returns even if stock prices continue to go nowhere,” USA Today said.

In 2016, Moody’s expects aggregate spending on capital investments, dividends, acquisitions and share buybacks to again approximate $1.9 trillion. “There’s only so much companies can do with their giant wads of cash since a vast majority isn’t in the U.S.,” USA Today noted.