The Activist Investor Blog
The Activist Investor Blog
Who Has the Biggest Cash Hoard?
The blog posts in the past couple of weeks (here and here), as well as the considerable debate over the past several months, got us to wondering: which US companies hoard the most cash?
Here’s the top ten (figures in $billion):
General Electric
Cisco Systems
Microsoft
Berkshire Hathaway
Google
Pfizer
Johnson & Johnson
Apple
General Motors
Oracle
79.0
40.2
40.0
38.2
35.0
28.0
27.7
27.0
26.6
24.8
366.5
The figure shown is total cash and short-term investments as of the most recent reported quarter for each company. These companies sit on over one-third 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:
Microsoft
Google
Apple
Cisco Systems
Intel
General Motors
Johnson & Johnson
WellPoint
Dell
Oracle
net cash
30.3
29.1
27.0
25.0
19.6
15.0
10.9
9.3
8.4
7.8
182.3
dividend
4.8
-
-
-
3.5
1.6
5.8
-
-
1.0
16.6
FCF
17.7
3.4
13.9
6.1
8.5
19.5
11.4
0.1
1.6
9.2
91.5
Net cash is the cash and short-term 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 and Berkshire Hathaway both have significant debt from their financial services businesses, so their cash hoards are much lower than we might think.
❖Not sure GM belongs on the list, but it does illustrate how bankruptcy can sure clean up a balance sheet.
❖Apple has zero debt, and some of the other technology firms (Intel, Google, Dell) have minimal debt loads relative to their cash.
❖Only one of the ten (Johnson & Johnson) pays a material dividend, and only five of the ten pay any kind of dividend at all.
❖All but one (WellPoint) can certainly afford a dividend, given their free cash flow.
These ten companies sit on a cash hoard of almost $200 billion. They will likely add a decent portion of their almost $100 billion in free cash flow to that hoard in a year’s time (they won’t invest every last penny of the $92 billion back into their respective businesses). Yet, they plan to return to investors less than a fifth of a year’s cash flow, or less than a tenth of the cash that they already have on-hand.
As suggested earlier, let’s split it with them. They could easily pay $100 billion to investors, from current cash reserves, without impairing investment. What’s holding them back?
Tuesday, March 15, 2011