The Activist Investor Blog
The Activist Investor Blog
Who Has the Biggest Cash Hoard? 2013 Edition
Once again, Apple gets into the news for its cash holdings. Moody’s announced that Apple controls 10% of the cash holdings of US non-financial companies. And, Carl Icahn crowed about his meeting with CEO Tim Cook to urge the company to increase its dividend.
All this prompted us to revisit our analysis from last year of corporate cash holdings, and update our tally of the top ten cash hoarders.
Here’s the current top ten (figures in $billion):
General Electric
Apple
Microsoft
Google
Cisco Systems
Pfizer
Chevron
ExxonMobil
Oracle
Coca-Cola
147.8
146.6
87.0
56.0
51.7
50.4
47.4
40.3
39.1
31.0
697.3
The figure shown is total cash and total investments as of the most recent reported quarter for each company. These companies sit on over two-thirds of a trillion dollars in liquidity.
In fairness, it’s not all liquid, and management needs the cash to run the business (right?). So, let’s reduce the balances to reflect what the companies owe. But, we can also consider what these companies earn each year in cash (free cash flow), and what they already pay to investors (total dividends).
We get a somewhat different top ten:
Apple
Microsoft
Google
Cisco Systems
Qualcomm
Chevron
ExxonMobil
Oracle
Pfizer
Johnson & Johnson
net cash
129.7
70.8
47.8
35.5
30.4
27.5
20.9
15.0
13.5
10.5
401.3
dividend
10.3
7.5
-
3.3
1.9
7.2
10.6
1.7
6.7
6.9
56.0
FCF
31.0
19.3
10.2
8.9
4.7
(2.1)
7.8
12.7
19.0
12.4
124.0
Net cash is the cash and total investments from above, net of all debt, as of the most recent reported quarter. Dividend and free cash flow are for the last twelve months for each company.
Some interesting things happen with this revision:
❖GE has significant debt from their financial services businesses, so their cash hoards are much lower than we might think.
❖Apple and some of the other technology firms (Microsoft, Google, Cisco, Qualcomm, Oracle) have minimal debt loads relative to their cash.
❖Seven of the companies now pay a nice dividend relative to free cash flow, with three of the technology firms paying little or no dividend.
❖The two energy companies paid a dividend greater than annual free cash flow, out of their abundant cash balance.
❖All can certainly afford a significant dividend, given their free cash flow.
These ten companies sit on a cash hoard of over $400 billion. They will likely add a decent portion of their over $100 billion in free cash flow to that hoard in a year’s time (they won’t invest every last penny of the $124 billion back into their respective businesses). Yet, they plan to return to investors less than half of a year’s cash flow, or less than an eighth of the cash that they already have on-hand.
As suggested earlier, let’s split it with them. They could easily pay $200 billion to investors, from current cash reserves, without impairing investment. What’s holding them back?
Thursday, October 3, 2013