On Friday, 20 May, 2016, Moody’s Investor Service released its latest report on Non-Financial businesses in USA currently holding $1.7 trillion in cash or marketable securities. In this $1.7 trillion in cash, more than a third of it is in the hand of top five companies in the world; Microsoft, Cisco, Apple, Oracle and Alphabet (Google parent’s company).
The top five companies account for $504 billion between them. According to the report, Apple alone stands for holding more cash and investment than eight of the ten entire industry sectors. If one looks at the previous year record, the top five companies have more cash concentration this year.
This year the companies accounted for 30% of the money in the USA, whereas the top five companies held 27% of the capital in 2014. In 2013, it held to 25% of the cash of the U.S. market. As per the report, the amount of cash held by US companies rose to 1.8% in 2015.
The growth of corporate America’s pile of money rising is very much needed for the development of the economy but unfortunately for the States 72% of the total cash held by non-financial US companies are outside the US borders. This figure is a major increase from 2014, where non-financial US companies own 64% of the market share. In 2013, the figure stood at 58%.
As per the report, dividends rose 4% last year, which is exactly $404 billion.
Moreover, in order to increase profit, the companies cut on capital spending by $885 billion. It is the new way of maintaining huge returns, even if the company stock value decreases with time.
If one looks at the Apple sheet, the cash balance and stock returns are detached with each other. Even though the company is only seeing profit year by year, investors have lost around $240 billion in the paper, since the stock value peaked last year.
Moody reports suggest that U.S Non-Financial companies will only see an increase in cash in the coming time. Also, the fact remains that some of the biggest holders of capital in the U.S. market are companies that have seen better stock rise in other countries. Apple, Alphabet, Microsoft, Oracle and Cisco have saved around $441 billion from outside the U.S border.