Chief Financial Officers (CFOs) at some of the nation's biggest
companies have a problem on their hands. They're tasked with
watching over billions, tens of billions or even hundreds of
billions of dollars every day, making sure to find ways to deliver
the best returns to shareholders while keeping enough aside for a
rainy day. With interest rates sitting at multi-decade lows, these
executives can't afford to let the money just sit there. That's why
more of them are looking at share buybacks, dividends, acquisitions
or higher levels of capital spending to take some of that cash off
of the sidelines and put it into action.
This is good news for investors. Because the more cash a company
deploys, the better the chances of bolstering the stock price.
We took a look at the cash balances of leading corporations and
were stunned to find how much some companies were sitting on. In
some instances, these companies have such a large amount of cash
that it equals or surpasses what some countries produce in terms of
annual economic activity (GDP ).
Here are 10 companies sitting on stunning amounts of cash (we
excluded traditional banks, which must have large cash balances to
meet liquidity requirements).
What are they doing with that money? Each one is using cash as a
strategic weapon, boosting shareholder returns by any means
possible.
1. Chevron
(NYSE:CVX )
Cash Balance: $43 billion |
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Selling oil and gas is so profitable that three of this
industry's biggest players make the grade when it comes to
major cash positions.
Chevron has $43 billion in the bank at last count, and
with more than $8 billion in annualfree cash flow , look for
that figure to keep on rising.
Management has sought to keep returning some of that cash
to shareholders: the annualdividend has steadily risen from
$1.43 in 2003 to a recent $3.60 a share.
|
2. Google
(NYSE:GOOG )
Cash Balance: $44 billion |
Executive Chairman Eric Schmidt can go in many directions.
Google is legendary for funding many internal ideas that
would get the red light at other firms.
Management believes that you need to pursue a wide range
of ideas raised by the company's engineers and marketers,
hoping one or two pay off handsomely.
Yet Google will also break out its checkbook when it spots
an opportunity. The company shelled out a hefty $12.5 billion
to acquire Motorola Mobility in 2011 in a bid to boost its
presence in mobile. That works out to be roughly one year's
worth of free cash flow, implying Google can keep seeking out
similar deals without even denting that cash balance.
|
3. ConocoPhillips
(NYSE:COP )
Cash Balance: $45 billion |
Oil giant ConocoPhillips has a seemingly impressive $45
billion in the bank.
But most of that cash is tied up in a range of joint
ventures across 15 countries and four continents.
Still, a steadily rising payout has been the beneficiary
of the unrestricted cash, enabling ConocoPhillips tooffer
investors a 4.5%dividend yield , the largest payout among the
"oil majors."
|
4. Ford Motor
(NYSE:F )
Cash Balance: $51 billion |
Just a few years removed from a devastating industry
downturn, Ford makes a surprise entry among the cash-rich
list. Consider these numbers: At the end of 2007, Ford had
$168 billion in long-term debtagainst $87 billion in cash.
By the end of 2011, Ford's debt had fallen below $100
billion -- a $68 billion reduction -- while cash dropped to
$51 billion -- a $36 billion reduction. That means Ford has
managed to boost its financial strength by $32 billion in
just four years -- even as the auto industry has been in a
big slump.
Ford's cash balance is now more than ample to fund
internal investments: Ford needs roughly $4 billion a year
for capital expenditures. Ford has also signaled plans to pay
greater attention to its dividend in 2013 (the current $0.20
annual payout works out to be paltry 1.9%yield ). Also, look
for the company to buy back big chunks of stock while the
share price is so depressed. Either way, it's a win/win for
shareholders.
|
5. ExxonMobil
(NYSE:XOM )
Cash Balance: $52 billion |
This oil giant bought natural gas producer XTO Energy for
more than $40 billion in late 2009, right before gas prices
tumbled. Had ExxonMobil waited a few years, it would have
been able to buy it for a lot less.
Investors are far more pleased with the company's track
record of stock buybacks: The share count has shrunk from 6.3
billion in 2005 to a recent 4.8 billion. A rising dividend
also helps ease the pain of that botchedacquisition.
What will ExxonMobil do with its current $52 billion pile
of cash? Likely more buybacks and an even fatter payout.
|
6. Cisco Systems
(Nasdaq:MSFT )
Cash Balance: $56 billion |
Like many other high-tech companies, Cisco historically
eschewed dividend payments, though it belatedly began giving
a payout in 2011 that still yields just 2.9%.
Over the years, Cisco has instead mostly focused its
massive cash hoard in two other areas: acquisitions and
buybacks. Cisco has made more acquisitions than any company
in the world in the past 15 years, according to research firm
Factset.
Cisco is also the king of stock buybacks, having
re-acquired more than 1.6 billion of itsshares since 2004.
Its total share count has shrunk by nearly a quarter since
then. With $56 billion still in the bank, Cisco may just be
on the prowl for anotheracquisition that gives it newfound
respect among investors.
|
7. Microsoft
(Nasdaq:CSCO )
Cash Balance: $73 billion |
When it comes to deal-making, Microsoft may not be quite as
gun shy as it has been in the past.
The company picked up Skype for $8.5 billion roughly a
year ago, and the move is already reaping many benefits
according the company. That just might embolden the board to
go out and seek another deal that sharpens Microsoft's game
against fast-moving rivals.
In fact, the current $73 billion cash balance could help
to buy up dozens of small, promising tech companies, giving
Mister Softee a foothold in newer, faster-growing
markets.
|
8. Apple
(Nasdaq:AAPL )
Cash Balance: $117 billion |
The house that Jobs built also has a growing cash conundrum.
Years of rapid and profitable growth have boosted the
company's coffers to the tune of $117 billion. The technology
titan just started paying dividends, though it can do a lot
better than its current paltry 1.5% yield.
You can probably forget about a major acquisition: Apple's
$2.5 billion in annual Research & Development (R&D)
expenses appear to provide the company with all of the new
products it needs.
As a possible surprise for investors, Apple could look to
issue a one-time $50 billion or $75 billioncash dividend to
shareholders.
|
9. GE
(Nasdaq:GE )
Cash Balance: $122 billion |
Over the years, GE's cash stash has enabled the firm to make
a series of acquisitions that bolster its presence in
healthcare, aerospace, power production equipment and
finance.
UnderCEO Jeff Immelt, GE has slowed down its pace of
acquisitions, but Immelt's trigger finger may be getting
itchy.
GE's current cash balance has swelled from $51 billion in
2007 to a recent $122 billon. As a first order of business,
GE could pay more attention to its dividend, which has fallen
from $1.24 in 2008 to a recent $0.68. Just restoring the
dividend to its former luster would create a 5.6% dividend
yield.
|
10. Berkshire Hathaway
(Nasdaq:BRK )
Cash Balance: $162 billion |
Warren Buffett's Berkshire Hathaway has a cash balance
roughly the size of Pakistan'seconomy . But Berkshire is an
insurance company that must keep much of that cash on hand to
pay out against policy claims.
Still, that doesn't stop Warren Buffett from using at
least some of that cash to acquire high cash-flow businesses.
In recent years, Berkshire has snapped up Burlington
Northern, Lubrizol and others, while also holding stakes in
companies such as
American Express (NYSE:
AXP
)
,
Coca-Cola (NYSE:
KO
)
and other publicly-traded firms.
|
Risks to Consider:
As was the case with ExxonMobil, companies can sometimes deploy
their cash too aggressively, overpaying for assets at the top of a
bubble. Natural gas looked like a great business in 2009 when
ExxonMobil bought XTO Energy, and many major deals of this size
often come at full prices.
Action to Take -->
These are truly the "rain-or-shine" stocks-type of
"Forever Stocks"
we spend a lot of time talking about at StreetAuthority. The huge
cash balances these companies have can be used to reward
shareholders with dividends and buybacks in the good times, and
used to outspend weakened rivals in tougher times. [For more on
stocks you canbuy and hold "forever,"
visit this link.
]
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.