Business has been good for most companies on Wall Street (ex-energy) for quite some time now. Higher revenues have led to higher profits, and despite major share buybacks and large dividend distributions, the cash is still piling up at many firms. According to a December 22nd report from FactSet Insight, the total balance of S&P 500 (ex-Financials) cash and short-term investments hit $1.45 trillion in the third quarter, the second highest level in a decade. FactSet Research Analyst Andrew Birstingl points out this represents a 5.8% growth rate on a year-over-year basis and a 0.95% growth rate quarter-over-quarter. Moreover, 7 out of 9 sectors in the index saw positive year-over-year growth, with the Consumer Staples sector at -2.3% and the beleaguered Energy sector at -7.5% the only exceptions to the trend of increased cash.
The IT sector reported the biggest cash balance ($566.7 billion) at the end of the third quarter, which has been the norm over the past 10 years. The top five companies ranked by quarterly cash in this sector were Microsoft ($99.4 billion), Alphabet ($72.8 billion), Cisco Systems ($59.1 billion), Oracle ($55.9 billion), and Apple ($41.6 billion).
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Cash piling up, but cap ex spending down in third quarter
The FactSet report also highlighted that fixed capital expenditures came to $157.1 billion in the third quarter, a 4.7% decrease from the year-ago period. This was the second straight quarter that capital spending in the S&P 500 (ex-Financials) was down year-over-year.
The Energy, Consumer Staples and Information Technology sectors saw CapEx declines in the third quarter on a year-over-year basis. The Energy sector suffered by far the biggest drop off in fixed capital expenditures at 33.3%. On a quarter-over-quarter basis, capital expenditures were down 7.4% in the Energy sector. With oil prices down 32.3% year-to-date, energy firms have no choice but to slash capital expenditures in order to preserve cash and dividends. ConocoPhillips and Apache cut CapEx by over $2 billion compared to 3Q a year ago, and Exxon, Occidental Petroleum, and Chevron all decreased spending by more than $1 billion year over year.
There were a few bright spots, however. The Consumer Discretionary sector reported the largest year-over-year growth in capital expenditures among all sector in the third quarter at +23.5%. This was the twelfth consecutive quarter that the Consumer Discretionary sector has experienced positive year over year growth in cap ex. Of note, General Motors was the largest contributor to the boom in cap ex, as capital spending from the year-ago quarter was up by over 100% to $6.4 billion. Media firms Comcast and Disney also boosted their cap ex in the third quarter, by +$238 million and +$141 million, respectively.
Shareholder Distributions Grow; Net Debt Issuance Slows
Birstingl also notes that quarterly net shareholder distributions (determined by adding dividend payments and net purchases of stock) totaled $196.3 billion in the third quarter. This is a 2.9% increase year-over-year and a spectacular 11.8% increase quarter-over-quarter. The total was the largest amount of net shareholder distributions for the S&P 500 (ex-Financials) in a quarter for over a decade. This massive shareholder distribution was primarily due to record levels of dividend payments paid directly to shareholders and more dollar-value share repurchases in the quarter.
Not surprisingly, companies in the IT and Consumer Discretionary sectors saw the highest net shareholder distributions in the quarter, with Apple and Microsoft head and shoulders above the rest of the pack.