Top Ten Profitable Companies in America
Chief Financial Officers (CFOs) at some of the nation’s biggest companies have a problem on their hands. They’re tasked with watching over billions, tens of billions or even hundreds of billions of dollars every day, making sure to find ways to deliver the best returns to shareholders while keeping enough aside for a rainy day. With interest rates sitting at multi-decade lows, these executives can’t afford to let the money just sit there. That’s why more of them are looking at share buybacks, dividends, acquisitions or higher levels of capital spending to take some of that cash off of the sidelines and put it into action.
This is good news for investors. Because the more cash a company deploys, the better the chances of bolstering the stock price.
We took a look at the cash balances of leading corporations and were stunned to find how much some companies were sitting on. In some instances, these companies have such a large amount of cash that it equals or surpasses what some countries produce in terms of annual economic activity (GDP).
Here are the top ten profitable companies sitting on stunning amounts of cash (we excluded traditional banks, which must have large cash balances to meet liquidity requirements).
What are they doing with that money? Each one is using cash as a strategic weapon, boosting shareholder returns by any means possible.
1. Chevron (NYSE: CVX) Cash Balance: $43 billion |
![]() Chevron has $43 billion in the bank at last count, and with more than $8 billion in annual free cash flow, look for that figure to keep on rising. Management has sought to keep returning some of that cash to shareholders: the annual dividend has steadily risen from $1.43 in 2003 to a recent $3.60 a share. |
2. Google (NYSE: GOOG) Cash Balance: $44 billion |
Google is legendary for funding many internal ideas that would get the red light at other firms. Management believes that you need to pursue a wide range of ideas raised by the company’s engineers and marketers, hoping one or two pay off handsomely. Yet Google will also break out its checkbook when it spots an opportunity. The company shelled out a hefty $12.5 billion to acquire Motorola Mobility in 2011 in a bid to boost its presence in mobile. That works out to be roughly one year’s worth of free cash flow, implying Google can keep seeking out similar deals without even denting that cash balance. |
3. ConocoPhillips (NYSE: COP) Cash Balance: $45 billion |
![]() But most of that cash is tied up in a range of joint ventures across 15 countries and four continents. Still, a steadily rising payout has been the beneficiary of the unrestricted cash, enabling ConocoPhillips to offer investors a 4.5% dividend yield, the largest payout among the “oil majors.” |
4. Ford Motor (NYSE: F) Cash Balance: $51 billion |
![]() By the end of 2011, Ford’s debt had fallen below $100 billion — a $68 billion reduction — while cash dropped to $51 billion — a $36 billion reduction. That means Ford has managed to boost its financial strength by $32 billion in just four years — even as the auto industry has been in a big slump. Ford’s cash balance is now more than ample to fund internal investments: Ford needs roughly $4 billion a year for capital expenditures. Ford has also signaled plans to pay greater attention to its dividend in 2013 (the current $0.20 annual payout works out to be paltry 1.9% yield). Also, look for the company to buy back big chunks of stock while the share price is so depressed. Either way, it’s a win/win for shareholders. |
5. ExxonMobil (NYSE: XOM) Cash Balance: $52 billion |
![]() Investors are far more pleased with the company’s track record of stock buybacks: The share count has shrunk from 6.3 billion in 2005 to a recent 4.8 billion. A rising dividend also helps ease the pain of that botchedacquisition. What will ExxonMobil do with its current $52 billion pile of cash? Likely more buybacks and an even fatter payout. |
6. Cisco Systems (Nasdaq: CSCO) Cash Balance: $56 billion |
![]() Over the years, Cisco has instead mostly focused its massive cash hoard in two other areas: acquisitions and buybacks. Cisco has made more acquisitions than any company in the world in the past 15 years, according to research firm Factset. Cisco is also the king of stock buybacks, having re-acquired more than 1.6 billion of its shares since 2004. Its total share count has shrunk by nearly a quarter since then. With $56 billion still in the bank, Cisco may just be on the prowl for another acquisition that gives it newfound respect among investors. |
7. Microsoft (Nasdaq: MSFT) Cash Balance: $73 billion |
![]() The company picked up Skype for $8.5 billion roughly a year ago, and the move is already reaping many benefits according the company. That just might embolden the board to go out and seek another deal that sharpens Microsoft’s game against fast-moving rivals. In fact, the current $73 billion cash balance could help to buy up dozens of small, promising tech companies, giving Mister Softee a foothold in newer, faster-growing markets. |
8. Apple (Nasdaq: AAPL) Cash Balance: $117 billion |
![]() You can probably forget about a major acquisition: Apple’s $2.5 billion in annual Research & Development (R&D) expenses appear to provide the company with all of the new products it needs. As a possible surprise for investors, Apple could look to issue a one-time $50 billion or $75 billion cash dividend to shareholders. |
9. GE (Nasdaq: GE) Cash Balance: $122 billion |
![]() Under CEO Jeff Immelt, GE has slowed down its pace of acquisitions, but Immelt’s trigger finger may be getting itchy. GE’s current cash balance has swelled from $51 billion in 2007 to a recent $122 billon. As a first order of business, GE could pay more attention to its dividend, which has fallen from $1.24 in 2008 to a recent $0.68. Just restoring the dividend to its former luster would create a 5.6% dividend yield. |
10. Berkshire Hathaway (Nasdaq: BRK) Cash Balance: $162 billion |
![]() Still, that doesn’t stop Warren Buffett from using at least some of that cash to acquire high cash-flow businesses. In recent years, Berkshire has snapped up Burlington Northern, Lubrizol and others, while also holding stakes in companies such as American Express (NYSE: AXP ), Coca-Cola (NYSE: KO ) and other publicly-traded firms. |
Risks to Consider: As was the case with ExxonMobil, companies can sometimes deploy their cash too aggressively, overpaying for assets at the top of a bubble. Natural gas looked like a great business in 2009 when ExxonMobil bought XTO Energy, and many major deals of this size often come at full prices.
Action to Take –> These are truly the “rain-or-shine” stocks-type of “Forever Stocks” we spend a lot of time talking about at StreetAuthority. The huge cash balances these companies have can be used to reward shareholders with dividends and buybacks in the good times, and used to outspend weakened rivals in tougher times. [For more on stocks you can buy and hold “forever,” visit this link.]