Corporations Putting Cash to Use as Stocks Near 11-Month Low
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Insider buying has picked up over the last several weeks, with CEOs and other executives picking up shares at a discount.
But that doesn't necessarily help the everyday investor, aside from a little confidence. Here's an interesting tidbit: according to the U.S. Federal Reserve in June, U.S. non-financial companies have a record $1.84 trillion in cash and liquid assets on the balance sheet through the first quarter of 2011 (click here for the fun-filled Flow of Funds balance sheet). Cash made up about 7 percent of all company assets, the highest level recorded since 1963.
So, with cash on the books, and stocks at value prices, what's a company to do?
Three words: Dividends and buybacks.
Streetinsider's Dividend Insider section is a great way to find out which companies offer the fattest dividend yields.
Unlike dividends, buybacks last over a one-year period (generally; they can be shorter or longer, there is no standard time frame). In doing so, companies smooth out "bumpiness" in a stock price. The best part about buybacks right now: companies don't appear to be holding back.
Just this week, 36 companies announced buybacks for about $6.959 billion (Covidien (NYSE: COV) may skew the numbers a little; its buyback plan is for up to $2 billion). Okay, assuming 35 companies for $4.959 billion, that's $141 million per company on average. Notably, the calculation doesn't include simple common stock buybacks.
Since Alcoa (NYSE: AA) (the unofficial opener for the earnings season each quarter) reported second-quarter earnings on July 11th, about $42 billion of buybacks have been announced, excluding stock quantity buybacks. Okay, so the number isn't really putting a dent in the $1.84 trillion on balance sheets, but its a start. With calculations of dividends and pure stock repurchases, that number might jump to $70 or $80 billion.
Here's a list of some of the more notable buyback announcements during the second quarter:
But that doesn't necessarily help the everyday investor, aside from a little confidence. Here's an interesting tidbit: according to the U.S. Federal Reserve in June, U.S. non-financial companies have a record $1.84 trillion in cash and liquid assets on the balance sheet through the first quarter of 2011 (click here for the fun-filled Flow of Funds balance sheet). Cash made up about 7 percent of all company assets, the highest level recorded since 1963.
So, with cash on the books, and stocks at value prices, what's a company to do?
Three words: Dividends and buybacks.
Streetinsider's Dividend Insider section is a great way to find out which companies offer the fattest dividend yields.
Unlike dividends, buybacks last over a one-year period (generally; they can be shorter or longer, there is no standard time frame). In doing so, companies smooth out "bumpiness" in a stock price. The best part about buybacks right now: companies don't appear to be holding back.
Just this week, 36 companies announced buybacks for about $6.959 billion (Covidien (NYSE: COV) may skew the numbers a little; its buyback plan is for up to $2 billion). Okay, assuming 35 companies for $4.959 billion, that's $141 million per company on average. Notably, the calculation doesn't include simple common stock buybacks.
Since Alcoa (NYSE: AA) (the unofficial opener for the earnings season each quarter) reported second-quarter earnings on July 11th, about $42 billion of buybacks have been announced, excluding stock quantity buybacks. Okay, so the number isn't really putting a dent in the $1.84 trillion on balance sheets, but its a start. With calculations of dividends and pure stock repurchases, that number might jump to $70 or $80 billion.
Here's a list of some of the more notable buyback announcements during the second quarter:
- July 12 - News Corp (Nasdaq: NWSA) at $5 billion
- July 13 - Walgreen (NYSE: WAG) at $2 billion
- July 21 - Hewlett-Packard (NYSE: HPQ) adding $10 billion
- July 27 - Visa (NYSE: V) at $1 billion
- July 28 - Boston Scientific (NYSE: BSX) at $1 billion
- July 28 - Motorola Solutions (NYSE: MSI) at $2 billion
- Aug 2 - Molson-Coors (NYSE: TAP) at $1.2 billion
- Aug 2 - Harris Corp. (NYSE: HRS) at $1 billion
- Aug 4 - Discovery Communications (Nasdaq: DISCA) at $1 billion
- Aug 4 - CF Industries (NYSE: CF) at $1.5 billion
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