S&P 500 Companies Piling Up The Cash

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A report released last Friday, March 26th, by research firm FactSet highlights the fact that the companies that make up the S&P 500 (INDEXSP:.INX) index (ex-financials) are generating cash at a record-setting pace.

The overview of the report sketches out some of the reasons for the growing accumulation of cash. “One of the major factors for cash growth was large cash inflows from operations. S&P 500 companies generated $381.5 billion in operating cash flow in Q4, the largest amount in at least ten years. This resulted from 6.2% growth year-over-year, and due to a decline in fixed capital expenditures (-4.0%), free cash flow (operating cash flow less fixed capital expenditures) grew at an even higher rate of 15.6%.”

S&P 500: Aggregate cash up 14%

FactSet also reports that the S&P 500 (ex-financials) cash and marketable securities position increased by 13.9% year-over-year to a balance of $1.41 trillion at year-end 2013.

Free cash flow increased almost 16%

Furthermore, free cash flow also improved significantly for S&P 500 companies. “Cash flows from operations amounted to $381.4 billion in Q4, which marked an increase of 6.2% year-over-year. Supported by a decline in quarterly fixed capital expenditures (-4.0%), free cash flow to equity increased by 15.6%, the fastest rate of growth in nine quarters.”

Capital expenditures down

Decreasing capital expenditures are also certainly contributing to the rate at which cash is piling up. “Capital expenditures declined by 4.0% in Q4, and increased by only 0.3% in 2013. The annual growth rates for capital expenditures were 10.5% in 2012 and 39.7% in 2011.”

Cash inflows from debt issuance

Yet another reason cash is growing is that, according to FactSet, cash inflows from net debt issuance among S&P 500 companies were also positive (to the tune of $33.8 billion) for the fourteenth consecutive quarter.

Increased shareholder distributions

Furthermore, S&P 500 (INDEXSP:.INX) companies are managing to pile up all this additional cash even though they are increasing the amounts they are distributing to shareholders. According to FactSet, shareholder distributions including dividends and net repurchase of stock ($171.5 billion) increased 148% year-over-year from fourth quarter 2012 to fourth quarter 2013.

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