S&P 500 companies with most cash are squatting on a trillion bucks and not rushing to give it to the rightful owners: investors.
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Just 13 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 $1 trillion, says an Investor's Business Daily analysis of updated data from S&P Global Market Intelligence and MarketSmith.
Apple alone last quarter reported sitting on $167 billion in cash and investments. That's 6.3% of all the S&P 500's cash. And it's only down 1.5% from fiscal 2022, despite the company paying a tiny 0.6% dividend yield. And last quarter, Alphabet said it's holding $150 billion in cash and investments, up more than 4% from 2022.
The massive cash pile held by just 13 companies accounts for nearly 40% of the $2.6 trillion held by all of the companies in the S&P 500. S&P 500 companies now have enough cash to give $7,926 to every man, woman and child in the U.S.
And investors want what's theirs.
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S&P 500 Cash Back On Investors' Minds
have roughly the same amount of cash now that they ended 2020 with. And that's the point. 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 big dent in cash coming in from record profits. Companies paid $576 billion in dividends in the past 12 months through June, says S&P Dow Jones Index Strategist Howard Silverblatt. But that's only up 16% from the same period in 2020. The yield on the S&P 500 is just 1.6% — a fraction of what it was two years ago.
Meanwhile, companies paid out $812 billion in buying back their own stock in the 12 months ended June 2023, says Silverblatt says. That's down from the record $1 trillion companies spent buying back stock in the same period ended in 2022. .
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 $166 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 $166 billion. That's a staggering amount, totaling 6% 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.
In the last 12 months since June, Apple spent roughly $86 billion buying back its stock. But that's just a drop in a rapidly filling bucket. Apple's amount of cash and short-term investments actually rose by nearly 29% in the past 12 months ending in July from fiscal 2022 ended in September. Additionally, the company yields just 0.5%.
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 $149 billion. That's nearly 6% of all the S&P 500's cash in the hands of a single company. And it just keeps piling up.
Microsoft, too, pays a 0.8% dividend yield. And it only worked down its cash and investments in 2023 marginally. It's still holding $121 billion, or 5%, of the S&P 500's cash pile.
When will investors get more of this cash? There are spots of yield, In fact, five of the top 13 S&P 500 companies with the most cash yield more than 2.0%. Those are ExxonMobil (XOM) at 3.1%, Pfizer (PFE) at nearly 5%, Chevron (CVX) at 3.6%, CVS Health (CVS) at 3.4% and Amgen (AMGN) at 3.2%.
But investors are going to want what's theirs.
S&P 500 Companies With The Most Cash
| Company | Symbol | Cash and investments ($ billions) | % of cash held by S&P 500 | Yield | Sector |
|---|---|---|---|---|---|
| Apple | (AAPL) | $166.5 | 6.3% | 0.5 | Information Technology |
| Alphabet | (GOOGL) | $149.6 | 5.7% | 0 | Communication Services |
| Microsoft | (MSFT) | $121.1 | 4.6% | 0.8 | Information Technology |
| UnitedHealth | (UNH) | $92.3 | 3.5% | 1.5 | Health Care |
| Exxon Mobil | (XOM) | $69.1 | 2.6% | 3.1 | Energy |
| Amazon.com | (AMZN) | $66.5 | 2.5% | 0 | Consumer Discretionary |
| Pfizer | (PFE) | $59.7 | 2.3% | 4.8 | Health Care |
| General Electric | (GE) | $59.7 | 2.3% | 0.3 | Industrials |
| Meta Platforms | (META) | $59.7 | 2.3% | 0 | Communication Services |
| Chevron | (CVX) | $56.4 | 2.1% | 3.6 | Energy |
| Elevance Health | (ELV) | $45.1 | 1.7% | 1.3 | Health Care |
| CVS Health | (CVS) | $39.0 | 1.5% | 3.4 | Health Care |
| Amgen | (AMGN) | $38.6 | 1.5% | 3.2 | Health Care |
Sources: IBD, S&P Global Market Intelligence as of latest reports as of Sept. 19, 2023
Follow Matt Krantz on Twitter (X) @mattkrantz
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As a seasoned financial analyst with a deep understanding of corporate finance and market dynamics, I'd like to delve into the article that discusses the significant cash reserves held by certain S&P 500 companies and the implications for investors. My extensive knowledge in this field allows me to provide insights and analysis on various concepts presented in the article.
1. Cash Reserves of S&P 500 Companies: The article highlights that only 13 non-financial companies in the S&P 500, primarily tech giants like Apple, Alphabet, and Microsoft, are holding more than $1 trillion in cash and investments. This finding is supported by data from S&P Global Market Intelligence and MarketSmith.
2. Composition of Cash Reserves: Apple, the leading company in terms of cash holdings, reported having $167 billion in cash and investments in the last quarter, constituting 6.3% of the entire S&P 500's cash. Similarly, Alphabet mentioned holding $150 billion, representing over 4% growth from the previous year.
3. Concentration of Cash Pile: The cumulative cash pile of these 13 companies accounts for nearly 40% of the total $2.6 trillion held by all S&P 500 companies. This concentration raises questions about the allocation and utilization of such substantial financial resources.
4. Trends in Cash Accumulation: Despite 2020 being a year marked by increased cash hoarding due to the pandemic, companies seem to be slow in returning this excess cash to shareholders. The article points out that companies now hold roughly the same amount of cash as they did at the end of 2020.
5. Shareholder Returns: The article discusses two primary ways companies return cash to shareholders: dividends and stock buybacks. While dividends have increased this year, they are not sufficient to offset the substantial cash influx from record profits. Stock buybacks, on the other hand, have decreased from the previous year.
6. Individual Company Analysis: The piece highlights specific companies and their cash positions. For instance, Apple's $166 billion cash reserve is characterized as a "problem," with the company struggling to dispense of the excess money despite utilizing dividends and buybacks. Alphabet, not paying any dividends, is sitting on $149 billion in cash.
7. Investor Expectations: Investors are keen on receiving their share of the cash held by these companies. The article suggests that there are areas of yield, and it mentions five of the top 13 companies with the most cash that yield more than 2.0%.
8. Dividend Yields and Sectors: The article provides a table listing the top 13 S&P 500 companies with the most cash, along with their cash and investments, the percentage of cash held by S&P 500, and their respective yields. For example, Pfizer is noted for having a yield of nearly 5%.
In conclusion, the article sheds light on the substantial cash reserves held by a select group of S&P 500 companies, the challenges they face in returning cash to shareholders, and the expectations of investors regarding these financial resources.
