Large U.S. companies hold billions of dollars in cash and cash-equivalents on their balance sheets. The largest of these 83 companies hold over $1.46 Trillion off-shore beyond the reach of the U.S. government according to a report by Bloomberg in March this year. Companies are hoarding such huge piles of cash overseas since they do not want to pay taxes if repatriated back home.They also hold high amounts cash and equivalents in the U.S. as they are unable to invest them in productive ways. While it would be better for all stakeholders if they put this cash hoard to work by building factories and expanding locally and globally, nowadays management and the boards that are supposed to monitor them in many firms are incompetent, selfish and lazy. They would rather waste shareholder wealth on share buybacks, acquisitions or simply help themselves by dipping into the cookie jar with outrageous pay packages, bonuses, stock options and other legally-allowed compensation schemes.
The table below lists the Top 25 S&P 500 Non-Financial Companies by Cash & Short-Term Investments held on their balance sheets:
|S.No.||Company||Ticker||Dividend Yield as of May 31, 2013||Cash ($Mil.) as of May 15, 2013||Sector|
|10||Johnson & Johnson||JNJ||3.04%||21,089||Health Care|
|17||Abbot Labs||ABT||1.48%||15.174||Health Care|
Source: Where to find higher yields, 4/22/13, Fidelity Investments
Nearly half of the companies noted above tech companies.This is because they generate a larger portion of their revenue overseas and have traditionally paid out low or no dividends to shareholders. As a result they accumulate cash year after year.
The dividend yield on the S&P 500 as of May 7 was 2.15% and the dividend payout ratio was 32%. Of all the sectors in the index, the technology sector was one of the sectors with low dividend yields and payout ratios. While utilities and telecoms had dividend yields of over 4% and 3% respectively, the technology sector had a dividend yield of just 1.81% and a payout ratio of 22%. The sector accounted for only 15% of the total dividends paid in the index. Since large-cap technology firms hold so much cash and short-term investments on their balance sheet, Fidelity noted that the possibility of potential dividend increases by these firms is high.
- SPDR S&P 500 ETF (SPY)
- SPDR Technology Select Sector ETF (XLK)
- SPDR S&P Dividend ETF (SDY)
- Vanguard Dividend Appreciation ETF (VIG)
Disclosure: No Positions