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Tech Cash Hoard Grows as Activists Press Apple Payouts

Updated from 9:52 a.m. ET to include Carl Icahn comment

NEW YORK (TheStreet) -- Tech sector heavyweights such as Apple (AAPL), Google (GOOG) and Microsoft (MSFT) continue to grow their cash stockpiles, even as activists successfully press for higher payouts of dividends and share repurchases.

Still, as tech blue chips institute dividends that more closely resemble the payouts of staid Dow Jones Industrial Average heavyweights like Exxon Mobil (XOM), bank accounts may be closing in on an inflection point. Cash held at tech firms continues to grow in proportion to other sectors, but the rate of acceleration continues to slow.

Debt levels and dividend payouts, led by Apple, are on the rise after the company committed to returning most of its quarterly free cash flow to investors in the most recent quarter. Microsoft, meanwhile, is doubling down on a cash burning investment in the consumer smartphone market and Google appears poised to become the next cash-rich tech sector titan to pay out a dividend, albeit in a few years' time.

For now, cash continues to roll into Silicon Valley and especially at Apple.

The tech sector's $515 billion cash stockpile now represents 56% of the funds held at the top-50 cash-rich corporations in the U.S. and has grown in 2013 amid record payouts from the likes of Apple, according to Moody's. Even as Apple instituted a record $18.8 billion cash return in its most recent quarter, the iPhone and iPad maker continues to see its bank account grow in proportion to the rest of corporate America.

Apple now accounts for 9.9% of non-financial corporate cash, according to Moody's, up from year-end 2012 levels of 9.5% when the company had a far less aggressive dividend and share buyback policy. If Apple's earnings hold up as the company pushes out new smartphones and works to grow in Asia, investors such as Carl Icahn of Icahn Enterprises and David Einhorn of Greenlight Capital could press for even bigger payouts.

On Monday, Icahn met with Apple CEO Tim Cook after the billionaire activist tweeted that he planned to discuss the magnitude of the firm's share buyback plan in August. While nothing conclusive came from the meeting, Icahn took to Twitter to say he pushed hard for a $150 billion share buyback and will continue to discuss the proposal in coming weeks.

"Had a cordial dinner with Tim last night. We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks," Icahn wrote in a Tuesday tweet.

In April, Apple said it would increase its quarterly dividend to $3.05 a share as part of a plan to return $100 billion in cash to investors by the end of 2015.

The company then launched a record $17 billion debt offering to finance buybacks and dividend increases, in a move that was applauded by investors such as Einhorn.

While Apple has instituted a radical change to its capital allocation policy since the end of 2012, Moody's underlying data indicates the company continues to the most prominent cash generator in corporate America.

Apple shares were rising less than 1% in early Tuesday trading to $480.73. Year-to-date shares have fallen nearly 10% excluding dividend payments.

-- Written by Antoine Gara in New York

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