BALTIMORE (Stockpickr) -- More than ever before, companies are stashing their cash. The S&P 500 alone is up to more than $1 trillion in corporate coffers, the result of record-high profits and a low-interest-rate environment that's kept investment options low.
Don't know what to do with a trillion dollars? Put it under the mattress.
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On an absolute basis, companies have never held such high levels of cash in their treasuries. And as a percentage of assets, cash has reached a level that's been unheard of since the 1970s. Around 25% of the S&P's current price is covered by cash in the bank.
But if you think that excessive cash holdings are a drag on performance right now, think again.
Over the last decade, the top tier of cash-rich stocks worldwide generated total returns of 297%. Thats triple what the S&P 500 earned over the same period. Yes, cash is still king this year.
Part of that stellar outperformance has to do with what cash enables companies to do. Capital gains are great, but historically speaking, the majority of portfolio growth comes from other sources. Dividends, share buybacks, and debt repurchases all inject value directly into your shares, and on a year-to-year basis, they also account for around 50% of annual stock performance. Only companies with cash that have the wherewithal to boost those payouts on command.
In short, cash provides options. Firms with cash can opt to increase shareholder value by paying a dividend or initiating a share buyback. Plus, they have the ability to take advantage of pricey M&A opportunities and internal investments.
So today, we're taking a look at five firms that fit the tight set of quantitative criteria that beat the S&P by a factor of 3.