Thursday, June 26, 2014

Corporate Cash Is King

Earlier this week Factset Research (FDS) released their Cash & Investment Quarterly for the S&P 500 Index covering the first quarter. Notable was the near 46% growth on a year over year basis in shareholder distributions (dividends plus buybacks) totaling $193.8 billion. The report also notes share repurchases alone were higher by 50% in the first quarter.

From The Blog of HORAN Capital Advisors

Other notable highlights from the report:
  • "Aggregate Cash Grew 7%: The S&P 500 (ex-Financials) cash and marketable securities balance grew 6.6% year-over-year to a balance of $1.34 trillion at the end of Q1. However, cash declined sequentially by 4.7%, primarily as a result of Verizon Communications (VZ) closing its acquisition of the remaining stake of Verizon Wireless."
  • "Free Cash Flow Grew 9%: Cash flows from operations amounted to $282.0 billion in Q1, which marked an increase of 7.4% year-over-year. Free cash flow to equity increased by 8.7%."
  • "Capital Expenditures Grew 6%: Capital expenditures (“CapEx”) accelerated growth to 6.2% in Q1. In the past four quarters, growth had not exceeded 1.5%. Analysts project that the 2014 growth rate for CapEx will be 6.7%, but also predict it will turn negative in 2015 (-1.2%)"
  • "Net Debt Issuance Positive for Fifteenth Straight Quarter: Cash inflows from net debt issuance were positive for the fifteenth straight quarter. Inflows of $74.1 billion were the second highest quarterly amount over that period."
The growth in capital expenditures is noteworthy as it does not include expenditures that are attributable to acquisitions. The entire report is worth evaluating as it provides insight into the cash generating capability of companies in Q1 in spite of the weakness that is being blamed on the winter weather.

Disclosure: Long VZ


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