Corporate Cash Holdings Declined In 2018

U.S. corporate balance sheets have declined since the 2017 tax overhaul signed into law by President Donald Trump, as companies allocated more money to share buybacks, dividend hikes, acquisitions and capital spending.

According to a report in The Wall Street Journal, citing Moody’s Investors Services, as a result of the record spending, U.S. corporate cash holdings hit $1.685 trillion last year, reaching a three-year low.

The decline in the amount of cash companies had in their coffers, which is the first slide since 2015, underscores the moves by corporate America to take advantage of the lower taxes on income made overseas. For fast-growing tech companies, it’s normal to have war chests of cash and choose to keep the profits outside the U.S., given the 35 percent corporate tax rate on money brought back into the country. But the 2017 tax overhaul bill lowered that rate, prompting companies to bring it back to the U.S. in the form of dividends payments.

According to the report, Apple’s cash position declined 14 percent last year to $245 billion. Rounding out the top five companies to see cash decline are Microsoft, Alphabet, Amazon and Facebook. Amazon and Facebook pushed Cisco Systems and Oracle out of the top five. Combined, all five companies had $564 billion in a cash balance, which was lower than $675 billion in 2017.

The analysts at Moody’s expect companies to continue to use their cash during the next few years to reduce debt, and to increase the return to shareholders via dividends and stock buybacks. Apple already said last year that the aim is to be cash neutral, carrying the same amount of cash and debt.

“Our priorities for cash have not changed over the year,” Chief Financial Officer Luca Maestri said in a conference call in April. As of the end of March, Apple had $225 billion in cash and a net cash position of close to $113 billion.