How Apple, Google and 7 Other Cash-Hoarding Companies Will Spend Their Billions

NEW YORK (TheStreet) -- Tim Cook says Apple (AAPL) isn't a hoarder, but it sure looks like it from an investor's standpoint.

The tech giant is sitting on a $178 billion cash stash, and it's not the only company with a big pile of money. The question now is what it and all of its other loaded peers will do with their stockpiles. 

A study from Moody's (MCO) indicates that U.S. non-financial companies held $1.73 trillion in cash and liquid investments in 2014, up 4% from 1.67 trillion the year before. Apple has the biggest reserve, followed by Microsoft (MSFT), Google (GOOG) (GOOGL), Pfizer (PFE) and Cisco (CSCO), which combined now hold $439 billion.

While cash piles are growing, outflows are increasing as well. Among U.S. non-financial companies Moody's measured, capital spending reached $937 billion in 2014, dividends hit $394 billion, and net share buyback totaled $289 billion -- all record highs. Moreover, acquisition spending increased 20% to $322 billion. 

"It's all a function of how much you had to begin with and how much you generate during the course of the year or any given period," said Richard Lane, senior vice president at Moody's. "These companies have spent money on capital expenditures, dividends, share buybacks and acquisitions, and they actually have more left over. You have to also take into account that, in aggregate, these companies borrowed money."

In other words, some companies, despite their high cash reserves, are borrowing money through bonds in the capital markets and bank loans to supplement spending.

Why? There are a number of factors at play. In many cases, it is simply cheap to borrow, thanks to low interest expense rates. In others, they have large portions of their cash abroad and would incur significant taxes in bringing the funds back to spend.

The latter is perhaps especially true for tech companies, which generate and maintain huge amounts of cash off shore. Cisco has 94% of its cash overseas, Microsoft 91%, Oracle 90%, Apple 89% and Google 60%. 

The result, Lane explained, is that the tech sector pays out about 30% of its discretionary cash flow in dividends, compared to 55% to 60% of the rest of the corporate universe. And when they do pay, they're using, at least in part, borrowed money, because they don't want to foot the tax bill incurred when repatriating cash. "They're using the cash that they have in the U.S., plus the amount that they generate in the U.S., plus incremental borrowings," he said.

Offshore and borrowing issues aside, it is clear that a number of companies have a lot of cash to dole out. Where will the money go?


Apple has been under pressure for quite some time over the size of its cash stash, which is $178 billion in total, including $158 billion overseas. Billionaire activist investor Carl Icahn has been extremely vocal about the issue since taking a stake in the company in 2013 and has pushed for buyback programs on numerous occasions. "Apple is not a bank," he said in an interview with TIME.

The tech giant has upped efforts to address its cash pile, and in April, it announced plans to increase its shareholder capital return program by more than 50%. It will utilize a cumulative $200 billion of cash by the end of March 2017 by expanding its share repurchase plan to $140 billion and increasing its dividend to $0.52 per share.

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