Corporate America Fear of the economic and regulatory unknown has caused many companies to hoard money. That despite the fact that many Americans, including President Obama, would prefer to see CEOs put some of those dollars into hiring unemployed workers.
(ELMAT: Obama is now getting agreement to get this cash out and kickstart the economy.)
a closer look at these famous "big dogs" in cash:
Microsoft Corp. (MSFT), the software giant that generates more than $1 billion in cash flow each month, has bought back large amounts of its own stock and has an AAA debt rating. Its wealth of cash for research and development makes it one of the few firms with the technology and financial resources to invest heavily in cloud computing, the emerging field in which hosted services are delivered on-demand over the Internet.
•Nike Inc. (NKE), the world's largest athletic footwear and apparel maker, enjoys an enormous cash cushion and is committed to returning cash to its shareholders. That strategy includes $5 billion in planned share repurchases over the next five years and ongoing dividend growth. Steady cash flow can also be used for acquisitions.
•McDonald's Corp. (MCD), the fast-food powerhouse, has a massive cash flow and substantial cash cushion because it receives franchisee royalties and rent payments even when the economy is doing poorly. It boasts a three-decade history of paying cash dividends and repurchasing shares.
"Put yourself in the place of the CEO, whose mandate it is to protect shareholders," said Kelley Wright, managing editor of Investment Quality Trends newsletter in Carlsbad, Calif. "If the CEO thinks hoarding cash is good because of uncertainty about what's next in the economy, then that is what will be done."
Having a lot of cash can sometimes mean that money isn't being spent where it should be to improve the overall business. We are exiting the period in which cost-cutting was revered for cost-cutting's sake alone. The reality is that firms can't really grow by cutting back.
"Look at where a company's cash is coming from — whether it is from sales and it is just booking the cash, or whether it is selling assets or closing plants," Wright said. "You don't want to see all that cash coming from shrinking its business."
As far as companies worth watching, Hogan notes Microsoft, along with Google Inc. (GOOG) and Boeing Co. (BA). He is surprised that cash-rich IBM (IBM) and Honeywell International (HON) are issuing debt even though they have such large amounts of cash on their books. Wright points to Nike and McDonald's, Altria Group Inc. (MO) and Johnson & Johnson (JNJ) as companies with money on hand and modest short-term liabilities.
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