Corporate America holds $1.7 trillion in cash: Study
21 May 2016
Corporate America is flush with cash, with non-financial businesses in the US currently holding $1.7 trillion in cash or marketable securities.
The bulk of it is held by just five technology companies, according to a Moody's Investors Service report released yesterday.
Apple, Cisco, Microsoft, Oracle and Google's parent company, Alphabet, between them held $504 billion, with Apple alone holding $216 billion, more than the aggregate total for eight of the 10 sectors of the corporate world.
The kitty represents a new record for cash and cash-like holdings in US companies, though it represented a slower pace of gains than previous years.
The cash pile swelled 1.8 per cent over 2015, reflecting a dip in profit margins toward the end of 2015, as also a continued pace of returning cash to shareholders. Companies in the S&P 500 paid out around $1 trillion in stock buybacks and dividends.
But the rising cash was not due to frugality.
As US law required companies to pay taxes on profits earned abroad, much of the cash was booked overseas. Those taxes could be deferred indefinitely if the cash stayed abroad though in fact much of it is invested in the US. According to Apple's most recent filings more than 90 per cent of the company's money was technically located outside US borders.
Meanwhile, Stock Market Today pointed out, ''The figures underscore how cash has become concentrated in a handful of companies, many of which have left earnings outside of the US to avoid the hit from repatriating profits under the country's complex tax code.
Analysts with the rating agency said that overseas cash, worth $ 1.2tn last year, would probably remain there as the US election looms. Companies are instead expected to deepen their reliance on debt, issuing bonds to finance shareholder returns and mergers and acquisitions.''