Overseas Cash Stash Drives U.S. Companies To New Record
NEW YORK ( TheStreet) -- Corporate cash stockpiles grew to $1.45 trillion in 2012, a new record for non-financial corporations as foreign earnings helped add to cash-rich balance sheets at the likes of Apple (AAPL) , Pfizer(PFE) and Cisco(CSCO) .
A new survey from Moody's indicates cash at America's largest corporations grew by 10% in 2012, as undistributed foreign earnings helped swell bank accounts at tech sector giants and the nation's largest pharmaceutical, energy and consumer products companies.
As for U.S. earnings, corporations spent the second half of the year returning money to investors by way of a boom in special dividends.
Apple, which currently holds a record $137 billion in cash, led all U.S. non-financial firms in its holdings.
Moody's analysts project that the iPhone and iPad maker could end the year with nearly $170 billion in cash. Such a scenario is possible, even after the Cupertino, Calif-based tech giant announced a dividend payout of nearly 30% of profits and continues to battle hedge fund manager David Einhorn on its payout.
Microsoft(MSFT) , Google(GOOG) , Pfizer(PFE) and Cisco(CSCO) rounded out the top five "cash kings," which with $347 billion in combined cash represented roughly a quarter of overall cash at U.S. corporations rated by Moody's.
In fact, after a year of dividend increases and a revival in capital spending, foreign earnings appear to be the only driver of growing cash at corporations. While overall cash grew about $130 billion, according to Moody's calculations, money held at foreign subsidiaries increased about $140 billion to $840 billion.
Foreign cash now represents about 58% of total cash and reflects the "relative strength of most emerging market economies over the last few years, the negative tax consequences of permanently repatriating money to the US, and the domestic use of cash for dividends, share buybacks, and the majority of acquisitions," according to Moody's analyst Richard Lane, who spearheaded the survey.
The growing of foreign cash stockpiles came as corporations pushed capital spending and dividends to six-year highs. Share buybacks and acquisitions declined in 2012, the data show.
Moody's expects trends seen in 2012 to persist this year.
"We expect overall business conditions will remain subdued over the next year. As a result, we anticipate aggregate spending in 2013 of about $1.7 trillion on capital investments, dividends, acquisitions, and share buybacks, slightly higher than 2012 levels."
For corporations, Moody's expects that the rich will continue to get richer. Cash at the top 50 cash-rich corporations grew to $889 billion in 2012 or 61% total holdings. That's a near doubling from the $445 billion in cash the top-50 firms held in 2006.
"We expect this percentage to be similar or higher in 2013, driven once again by Apple," Moody's notes.