S&P 500 members hold more than $1 trillion of the stuff [cash], including cash equivalents and short-term investments. That’s a 35% increase from the end of 2008. Why so much? The recent increase is owed to a mix of panic and prudence. A year ago, stock and house prices cratered, consumers clutched their wallets and lenders locked their doors, so company managers responded by selling off inventory and cancelling costly projects. As a result, while paper earnings plunged, cash flow remained relatively healthy, and because most companies stopped buying back shares and a few cut their dividends, cash balances swelled.
Cash put to good use can propel stock prices higher. Deutsche Bank recently published a report highlighting S&P 500 members that the investment bank believes will spend sharply more on dividends and share repurchases in coming years, based in part on the portion of cash flow they’ve retained of late, and on the amount by which their available cash exceeds their costs. Below are three companies mentioned in the report.
Source: SmartMoney
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