Global Economy
Standard & Poor's says top 50 non-financial global publicly traded companies have cash hoard of over $1trn
By Finfacts Team
Jan 28, 2011 - 5:32 AM

President Barack Obama looks at a turbine rotor while touring the General Electric plant in Schenectady, New York, with Jeff Immelt, CEO and Chairman of General Electric, left, and Kevin Sharkey, GE Infrastructure/Plant Manager, Jan. 21, 2011.

The S&P Valuation and Risk Strategies research group, is an independent research team at the credit ratings agency Standard & Poor's, and it has estimated that the top 50 non-financial global publicly traded companies have a cash hoard of over $1trn.

In the US, data from the Federal Reserve in respect of the third quarter of 2010, showed that non-financial US public companies held cash or cash equivalents, amounting to almost $1.9trn. Within that universe, the companies of the S&P 500 account for about $920bn of the total.

The jump in cash holdings reflect spending cuts and restructurings during the recession but also a response to low interest rates. The December Fed flow of funds statement (pdf) shows US corporate debt at a record high of $7.3trn. Cash as a % of this debt was at 26.4%.

S&P says in the past, much discussion among market participants, as well as commentary from Valuation and Risk Strategies Research, focused on the growing levels of cash and short-term investments that American corporations hold. Increased productivity and a recovery in earnings have, at least in part, fueled this bounty. To that end, investors have witnessed pick-ups in corporate stock buybacks, dividend payouts, and merger and acquisition activity. But what about the rest of the world? From the perspective of the global economy, where do US corporations rank relative to their counterparts worldwide in term of cash holdings?

With the help of Capital IQ data, the S&P research team examined the top 50 publicly traded companies globally, excluding financials, ranked by their latest reported quarter's total cash and short-term investment holdings. As indicated in the table below, the sum total for these companies' cash balances is approximately $1.08trn -- nearly matching the cash holding total for the entire S&P 500 Index.

S&P found 17 US-based companies among the top 50 global corporate cash holders -- which means that among specific nations, two-thirds of the top 50 global cash holding companies are headquartered outside of the US.

The team says from the perspective of dollar amounts, the 17 US companies account for $458.2bn, or about 42%, of the top 50's global cash holdings. Meanwhile, the cumulative cash holdings of the 13 companies located in Asia and Australia, among the 50 below, amount to more than $270.1bn, or about 25% of the group's total. In Europe, S&P identified 17 companies among the top 50 global cash holders with an aggregate cash holding total of $287.7bn, or about 27% of cash balances among the global top 50.

S&P says when considering the magnitude of corporate cash balances, investors would be well served to look at a variety of geographic locales. With the abundance of capital abroad, the likelihood exists for greater activity in cross-border mergers and acquisitions as well as for strong earnings growth outside the US To that end, the list below could serve as a starting resource for ideas on who may be buying, where deals could occur, and possibly where profits may emerge.