Flush from three years of soaring profits, the top US corporations hold $634 billion (€518bn) in cash, the biggest hoard relative to their market value in 17 years, according to Standard & Poor’s.
Companies including Exxon Mobil Corp, Dell Inc and Pfizer Inc are hearing from investors who say it’s time to either spend more to expand their business, or pay higher dividends.
Economist James Smith of the Centre for Business Forecasting at the University of North Carolina in Chapel Hill expects at least a 10% rise in capital spending this year and next.
The $634 billion held by non-financial companies in the Standard & Poor’s 500 as of March 31 represented 7.7% of their market value, the highest since 1988, and up from $352 billion, or 4.3% of market value, when the 2001 recession ended, according to S&P.
Almost half of 288 global fund managers surveyed by Merrill Lynch & Co said companies are failing to make needed investments in their businesses. The fund managers, who oversee $933bn, were divided over what companies should do with their cash, with 42% saying the money should be distributed to shareholders, and 38% favouring capital spending, Merrill Lynch said in an August 18 report.