S&P 500 companies with most cash are squatting on a trillion bucks and not rushing to give it to the rightful owners: investors.
Just 15 non-financial companies in the S&P 500, including mainly tech giants like Apple (AAPL), Google-parent Alphabet (GOOGL) and IBD Long-Term Leader Microsoft (MSFT), are sitting on cash and investments of more than a $1 trillion, says an Investor’s Business Daily analysis of updated data from S&P Global Market Intelligence and MarketSmith.
This massive cash pile accounts for nearly 40% of the $2.77 trillion held by all of the companies in the S&P 500. S&P 500 companies now have enough cash to give $8,320 to every man, woman and child in the U.S.
And investors want their share.
S&P 500 Cash Back On Investors’ Minds
Companies in the S&P 500 are squatting on 1% more cash now than they ended 2020 with. That might not sound like much of a change, but 2020 was a banner year for cash hoarding as companies hunkered down from the pandemic. Companies ended 2020 with roughly 20% more cash and investments than they had in 2019.
And yet, they’re being slow giving it money to shareholders.
Two ways shareholders get cash out of companies aren’t heating up enough: Dividends and stock buybacks. Dividends are picking up this year, but not enough to make a dent in cash coming in from record profits. Companies are on pace to pay $61 billion more in dividends this year, says S&P Dow Jones Index Strategist Howard Silverblatt. The yield on the S&P 500 is just 1.2% — a third of what it was two years ago.
Meanwhile, companies are likely to pay out $729 billion in buying back their own stock in 2021, says Silverblatt says. That’s up 55% from the paltry $520 billion companies spent buying back stock in 2020. But, it’s still less than the record $806 billion spent in 2018.
And now investors want their money. Berkshire Hathaway’s Warren Buffett spent much of his 2020 annual letter to shareholders beholding the “costless” and powerful way stock buybacks add wealth.
Apple’s $191 Billion Cash Problem
Apple has a cash problem. It’s just the opposite of most. Apple has too much cash.
The technology company now has cash and investments of $190.5 billion. That’s a staggering amount, totaling 7% of the holdings of all S&P 500 companies. To its credit, Apple is trying to dispense of the cash using both dividends and buybacks. But it can’t get rid of money fast enough.
Last year, Apple spent roughly $81 billion buying back its stock, which Buffett applauded in his letter. But that’s just a drop in a rapidly filling bucket. Apple’s amount of cash on hand only fell by 2.5% in 2021 so far. Additionally, the company yields just 0.6%.
What Will Tech Do With All Its Cash?
Apple is the most extreme example of a cash surplus, but it’s far from alone in the S&P 500.
Alphabet, which doesn’t pay a dividend at all is sitting on cash and investments of $168.5 billion. That’s more than 6% of all the S&P 500’s cash in the hands of a single company. And it just keeps piling up. Alphabet’s cash pile is 7% higher now than it was in 2020.
Microsoft, too, pays a 0.7% dividend yield. And it only worked down its cash and investments in 2021 so far by about 1%. It’s still holding $136.98 billion, or 5%, of the S&P 500’s cash pile. In fact, not a single S&P 500 with in the top five in terms of cash holdings yield more than 1.3%.
But with vaccines rolling out and economies opening, investors are going to want what’s theirs.
S&P 500 Companies With The Most Cash
Cash and investments as of end of 2020, financial sector excluded
|Company||Ticker||Cash and investments ($ billions)||% cash of held by S&P 500||Dividend yield||Sector|
|UnitedHealth Group||(UNH)||68.6||2.5||1.3||Health Care|
|Meta Platforms||(FB)||64.8||2.3||0.0||Communication Services|
|Ford Motor||(F)||36.0||1.3||2.0||Consumer Discretionary|
|CVS Health||(CVS)||35.2||1.3||2.1||Health Care|
Sources: IBD, S&P Global Market Intelligence as of Nov. 12, 2021
Follow Matt Krantz on Twitter @mattkrantz