Corporations are Flush with Cash

August 2, 2010 at 2:30 am 1 comment

According to a recent Standards & Poor’s report, cash holdings of corporations today are at record levels, up 26% from a year ago.  U.S. corporations now have $1.8 trillion in cash; prominent tech companies are one of the top cash hoarders: Microsoft, Cisco, and Google have about $30 billion each.  It appears that corporations, like many mutual funds and individual investors, are concerned with “unusually uncertain” economy and seek safety with near zero returns on that cash.

But at some point, this cash has to go to work.  There are several possible ways for companies to use their cash reserves:

  • buy back shares
  • increase or initiate dividend
  • hire new workers
  • buy out other companies
  • invest in their own business

Many of the above is good for the economy and all are good for the stock market.  After all, keeping all that cash is not without its own risks, such as facing ever lower interest rates and inability to beat inflation with money market yields.

Entry filed under: Market Conditions.

Unusually Uncertain Caution Still Rules the Day

1 Comment Add your own

  • 1. Gridlock is Good « Sensible Investing  |  February 7, 2011 at 8:35 pm

    […] Cash continues to be a major holding on corporate balance sheet.  Sooner or later, it has to come into play, either in the form of […]

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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