Big cash in the wings starting to loosen up
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While President Barack Obama and Congress wrangle over a way to raise the federal debt ceiling, Corporate America sits on a pile of cash and weighs what to do with it.
Industrial companies in the S&P 500 held $963.3 billion in cash on their balance sheets at the end of the first quarter. S&P says that was 2 percent above year-end levels and 15 percent more cash than the companies had a year ago.
Despite the steady stream of acquisitions, dividend increases and stock buyback announcements, cash remains on the rise at many companies. Record fiscal third-quarter earnings reported last week by Apple [ticker: AAPL] boosted the Cupertino, Calif., computer-maker's cash to $12.1 billion, up 7 percent from a year ago.
Closer to home, PPG Industries [PPG] reported Thursday that it ended the second quarter with $1.2 billion in cash and short-term investments vs. $795 million a year ago. The increase came even though PPG raised its quarterly dividend in April by 2 cents to 57 cents per share.
Cash on the balance sheet of H.J. Heinz [HNZ], another company that recently sweetened its dividend, stood at $724 million at the end of April vs. $483 million a year ago. Heinz added 3 cents to its quarterly payout in May, raising it to 48 cents per share.
John Frankola of Pittsburgh-based Vista Investment Management attributed the husbanding of cash to enduring lessons companies learned from the credit crisis of 2008. Consequently, he believes that companies will hold more cash than they have in the past.
"Most companies have now positioned themselves more conservatively," Mr. Frankola said. "When companies stress-test themselves going forward, they will consider worst-case scenarios that were not envisioned just a few years ago."
First Published July 24, 2011 12:00 am
