Companies are getting more confident, says the AFP, and putting more of their cash holdings to work.
US non-financial companies added considerably to their cash holdings in 2012, but they might not add as much in 2013. According to the Association for Financial Professionals and its April 2013 Corporate Cash Indicators report, companies are getting more confident about the economy and thus decelerating cash accumulation.
In 2012, companies added $130 billion to their holdings, boosting total cash to a record $1.45 trillion. The growing cash piles were a result of a stagnating economy, a sideways labor market and few quality investment destinations. (Some have argued that growing corporate cash piles are also a result of better working capital management.) But with housing seemingly in recovery and other signs the economy is slowly emerging from its funk, companies are apparently putting some of their accumulated cash balances back to work.
According to the AFP’s findings:
- 38 percent of organizations held larger cash and short-term investment balances at the end of Q1 2013 than they did at the end of Q4 2012 while 28 percent had shed cash during the three months. The difference of +10 is up 5 points from the Q4 2012 survey results.
- 35 percent of organizations had greater cash and short-term investment balances at the end of Q1 2013 than they had one year earlier, while 27 percent held smaller cash balances relative to a year ago. The difference of +8 is 12 points below the previous quarter’s reading and down 5 points from Q1 2012.
- 23 percent of organizations anticipate expanding cash and short-term investment balances over the next three months, while
- 28 percent plan to reduce these balances. The net index reading of -5 is down 1 point from that reported in the Q4 2012 survey and is the lowest reading in the history of the survey series.
- 7 percent of organizations were more aggressive with short-term investments in Q1 2013 while 3 percent were more conservative. The different of +4 is up from zero during the prior two quarters.
Despite the signs of some cash leaking from reserves, some companies would rather borrow to give back. Just today Apple sold a record $17 billion in bonds to fund “general corporate purposes, which may include, but aren’t limited to, funding for working capital, payment of dividends, capital expenditures, repurchases of our common stock, and acquisitions.” Apple recently announced it was looking to return $100 billion to shareholders by the end of 2015. The company still reportedly has about $137 billion in cash stashed away.