The Activist Investor Blog
The Activist Investor Blog
Now, Who Has the Biggest Cash Hoard?
This week, Apple announced that it finally decided to start listening to investors, a little - it will now pay a quarterly dividend of $2.65 per share, and repurchase $10 billion in stock over three years.
The company’s magnanimity prompted us to revisit our analysis of a year ago 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
Cisco
Google
Chevron
General Motors
Pfizer
Johnson & Johnson
ExxonMobil
149.8
97.6
58.2
47.8
44.1
42.9
40.5
39.1
33.8
31.2
585.1
The figure shown is total cash and total investments as of the most recent reported quarter for each company. These companies sit on well over one-half 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
Chevron
Cisco
General Motors
Qualcomm
Oracle
UnitedHealth
Johnson & Johnson
net cash
97.6
45.4
37.9
32.8
30.9
26.6
21.1
16.3
16.2
14.2
339.0
dividend
-
5.2
-
6.1
0.7
0.9
1.3
1.1
0.7
6.2
22.2
FCF
20.9
17.8
8.3
13.9
7.9
4.2
3.7
10.5
6.0
8.6
101.9
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.
❖GM continues on the list, illustrating again how bankruptcy can sure clean up a balance sheet.
❖Apple has zero debt, and some of the other technology firms (Microsoft, Google, Cisco, Qualcomm, Oracle) have minimal debt loads relative to their cash.
❖Two of the ten (Chevron, Johnson & Johnson) pay a material dividend relative to free cash flow; eight of the ten (nine if we include Apple prospectively) pay some dividend.
❖All can certainly afford a significant dividend, given their free cash flow.
These ten companies sit on a cash hoard of over $300 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 $102 billion back into their respective businesses). Yet, they plan to return to investors less than a quarter 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 $150 billion to investors, from current cash reserves, without impairing investment. What’s holding them back?
Tuesday, March 20, 2012