US non-financial companies rated by Moody's Investor Services held $1.73tn in cash at the end of 2014, up 4% from $1.67tn a year earlier amid modest GDP growth, Moody's says in a new report. The top 50 holders of cash account for 63% of the total cash pile, or $1.08tn, and entry to the top 50 list now requires $6.1bn in cash. The top five firms held about 25% of the total.
Apple - $178bn
"Among sectors, technology continues to hold the most cash, followed by healthcare/pharmaceuticals, consumer products and energy," said Richard Lane, senior vice president. "The technology sector has extended its lead over the past year, with $690bn, or 40% of the total cash pile."
The top five cash kings, in order, are Apple, Microsoft, Google, Pfizer and Cisco, with Cisco replacing Verizon in the top five during the past year, Lane said in "Cash Pile Grows 4% to $1.73tn; Overseas Holdings Continue to Expand." Together, the top five most cash-flush companies now account for $439bn, or 25% of the total corporate cash pile, up from $404bn, or 24%, in 2013.
Apple held $178bn, or 10.2% of total corporate cash at year-end 2014, up from $159bn, or 9.7%, in December 2013. By itself, Apple now holds more cash than the total for every industry sector, excluding technology and healthcare/pharmaceuticals.
Capital spending of $937bn grew 8% in 2014 while dividends of $394bn and share buybacks totaling $289bn in 2014 were all record highs. Acquisition spending came in at $322bn, a 20% increase from 2013 levels, but effectively equal to 2011 and 2012 levels. Driven by an expected 30% decline in energy sector capital spending, Moody's expects combined spending on capital investments, dividends, share buybacks and acquisitions in 2015 to be about the same as last year, or around $1.9tn.
Overseas cash is estimated at $1.1tn, or 64% of current total cash, up from Moody's estimate of $950bn, or 58% last year, with the high amount reflecting the tax consequences of permanently repatriating money to the US, and the domestic use of cash for dividends, share buybacks and the majority of acquisitions.
“There has been little progress toward corporate tax reform that would incentivise US companies to permanently repatriate funds held overseas,” Lane said.
He added that companies are also taking on more debt because it is often cheaper for them to borrow money at low rates to pay out to shareholders than it is for them to repatriate cash generated overseas and pay taxes on it.
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