Cash Balance Grows 5.7% Year-Over-Year by Andrew Birstingl, FactSet

The S&P 500 (Ex-Financials) cash and short-term investments balance (cash) amounted to $1.45 trillion in the first quarter, which marked a 5.7% increase from the year-ago quarter and a 1% jump from Q4 2015. The balance in Q1 represented the largest cash total in at least 10 years.

Cash Balance

Cash Balance

The Information Technology sector maintained the largest cash balance ($603.8 billion) at the end of Q1, which has been the norm for the index. The sector saw its balance grow 20.1% from the year-ago quarter, which was more than any other sector. Microsoft and Alphabet topped the list of companies ranked by quarterly cash and short-term investments. Microsoft had a cash balance of $105.6 billion at the end of the quarter, while Alphabet had a balance of $75.3 billion. If long-term investments are included in the company’s cash total, then Apple and General Electric top the list with balances of $232.9 billion and $129.7 billion, respectively. The Information Technology, Consumer Discretionary, Consumer Staples, Materials, and Telecom sectors increased their cash totals on a year-over-year basis

Cash to Debt Ratio Falls to 34.7% in Q1; Lowest Ratio since Q2 2009

The aggregate cash balance of companies in the S&P 500 (Ex-Financials) index has continued to grow, but so too has the amount of debt. In fact, growth in aggregate debt has outpaced that of cash. During the first quarter, debt grew to $4.2 trillion for the index, a 9.9% increase year-over-year and a 3.3% uptick from Q4. The Q1 debt total marked the largest aggregate debt level in at least 10 years.

Cash Balance

The cash to debt ratio for the S&P 500 (Ex-Financials) index fell 3.8% to 34.7% in Q1, which marked the lowest ratio since Q2 2009. The 10-year average cash to debt ratio is 36%. At the sector level, six out of the nine sectors saw decreases in their ratios compared to the year-ago quarter. The Consumer Staples, Industrials, and Telecom sectors were the only groups to experience upticks in their aggregate cash to debt ratios. The Information Technology sector posted the biggest drop in its cash to debt ratio year-over-year (-22.4%).

Looking at the list of companies ranked by lowest cash to debt ratios, six of the 10 firms came from the Utilities sector. Historically, the Utilities and Telecom sectors have had the lowest cash to debt ratios out of the groups. It is interesting to note that many of the companies on this list have seen their stocks soar since the start of the year, despite these low ratios. On a total return basis, only Williams Companies and AutoNation are in the red year-to-date. In fact, seven of the eight companies whose stocks are up for the year have seen double-digit percentage gains.  NiSource and WEC Energy lead the group in terms of year-to-date total return (+31.6% and +25.5%, respectively).

The net debt to EBITDA ratio for the S&P 500 (Ex-Financials) index also hit a record at the end of the first quarter. The ratio increased to 1.66 in Q1, which marked the index’s highest net debt to EBITDA ratio in at least 10 years.  Keep in mind, this ratio does not take into account fixed capital expenditures or excess cash from the balance sheet.

Spending on Capital Expenditures Declines 4.9% Year-Over-Year

Fixed capital expenditures for the S&P 500 (Ex-Financials) index totaled $141.3 billion in Q1, which represented a 4.9% decrease from the year-ago period and a 17.6% drop from Q4 2015. The CapEx total in Q4 2015 was the third largest amount in the past 10 years.

Cash Balance

At the sector level, six out of nine sectors saw growth in fixed capital expenditures in Q1 (Consumer Discretionary, Consumer Staples, Health Care, Information Technology, Telecom, and Utilities). The Utilities and Consumer Discretionary sector led year-over-year growth in fixed capital expenditures by posting growth rates of 34.5% and 15.1%, respectively. The Q1 CapEx total in the Utilities sector was the second largest amount in at least 10 years, trailing only the total in Q4 2015. Within the sector, NextEra Energy and Entergy were two of the top contributors to year-over-year growth. NextEra grew quarterly fixed capital expenditures by over 300% to $3.9 billion in Q1, while Entergy increased CapEx 165% to $1.7 billion. Within the Consumer Discretionary sector, General Motors increased CapEx by over $3 billion year-over-year to $7.4 in total, while Amazon grew fixed capital expenditures 35% to $1.2 billion.

Read more about S&P 500 companies’ trends in corporate cash balances in this quarter’s edition of FactSet Cash & Investment Quarterly. Visit www.factset.com/cashinvestment to launch the latest report. 

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