Tags: US | companies | 439 billion | cash

Moody's: Top Five US Companies Hold $439 Billion of Cash

By    |   Tuesday, 12 May 2015 07:01 AM

With a sluggish economy providing limited investment opportunities and high U.S. corporate taxes discouraging companies from sending home their overseas profits, they are sitting on a huge bundle of cash.

The total is $1.73 trillion, including $439 billion from Apple, Microsoft, Google, Pfizer and Cisco alone, according to a study by Moody's Investor Services, the Financial Times reports.

Cash reserves climbed 4 percent for the non-financial companies covered by Moody's in the past year. It estimates that companies are holding 64 percent of the cash — $1.1trillion — overseas.

"There has been little progress toward corporate tax reform that would incentivize U.S. companies to permanently repatriate funds held overseas," said Moody's analyst Richard Lane, according to the FT.

The U.S. federal corporate tax rate runs as high as 35 percent, topping the scale among developed nations.

Many companies have opted to borrow at extremely low interest rates to finance their spending rather than using cash. Much of corporate spending is now going to fund share buybacks and dividend increases — to the tune of an estimated $1 trillion for this year.

Meanwhile, corporate profits are sliding, with S&P 500 earnings expected to show a 0.1 percent dip for the first quarter, according to FactSet.

And that may be bad news for stocks, says Jeffrey Kleintop, chief investment strategist for Charles Schwab.

"With stocks on the rise in the world’s major markets in 2015, investors may be overlooking the fact that earnings, one of the most important drivers of long-term stock market performance, have been falling," he writes in Barron's.

"Fortunately, we believe this decline may be relatively short-lived. But if earnings keep dropping for a prolonged period, stocks may suffer significant declines, since their above-average valuations in many markets leave little room for disappointment."

In the United States, the S&P 500 index stands at 2,114, less than 1 percent below its record high. And the S&P 500's trailing price-earnings ratio registered 21.13 last Friday, up from 17.85 a year earlier, according to Birinyi Associates.

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With a sluggish economy providing limited investment opportunities andhigh U.S. corporate taxes discouraging companies from sending hometheir overseas profits, they are sitting on a huge bundle of cash.
US, companies, 439 billion, cash
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2015-01-12
Tuesday, 12 May 2015 07:01 AM
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