Apple is still the king of cash in the S&P 500. But it's doing it by squatting on money that should go back to you — the investors.
The smartphone maker ended 2022 sitting on $165.5 billion in cash and investments. That enormous pile of cash makes Apple 15% richer than the next closest member of the S&P 500, Alphabet, which ended the year with $144.3 billion in cash. So says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Just these two companies control roughly 13% of the cash and investments held by nonfinancial companies in the S&P 500. Investors are getting their first glimpse at just how concentrated the index's cash is. Roughly 95% of the 433 nonfinancial companies in the S&P 500 have reported their year-end cash positions over the past two weeks.
But adding insult to the rampant cash hoarding going on in the S&P 500 is that many of these companies are stingy with returns. Apple now yields just 0.6%, and Alphabet doesn't pay a dividend at all.
Sizing Up The S&P 500's Cash
That's not to say that S&P 500 companies aren't finding uses for their cash at all.
The 95% of nonfinancial companies to report their cash positions ended the year with a collective $2.4 trillion in cash and investments. That's actually down 11% from 2021's level. Dividends are part of the reason. The average S&P 500 company pays a dividend yield of 1.9%.
Additionally, many S&P 500 companies spent big buying decent chunks of their own stock for most of last year. But that's slowing down, too. "Buybacks, which set a record in the first quarter of 2022 at $281 billion, declined in the second quarter to $220 billion and in the third quarter to $211 billion," said Howard Silverblatt of S&P Dow Jones Indices.
But many of the largest hoarders of cash can afford to pay much more.
Looking At Apple's Cash
Apple could clearly yield more. The company ended 2022 with $51.4 billion in cold hard cash. And it also has $114.1 billion in long-term investments, most of which is stuffed in U.S. Treasuries.
And yet, with a yield of just 0.6%, it's paying out less than the SPDR S&P 500 Trust at 1.6%. Additionally, Apple's payout ratio is just 15.6%. That means it's redistributing less than 16% of its 2022 profit to investors. Its payout has been much higher in the past, hitting 25.6% in 2019 for instance.
But in many ways Apple seems to have the "problem" many would love to have: It can't get rid of money fast enough. On top of its dividend payments, the company spent $24.7 billion on buybacks just in the third quarter of 2022 alone, Silverblatt says. That's 60% more than the No. 2 buyback company, Alphabet, spent in the quarter.
Where's The Cash?
But if Apple's hoarding is curious, it's downright mysterious at Google. Yes, the company is falling behind ChatGPT for AI searches. Catching up will take investment. But it still ended the year with $144.3 billion in cash and investments. That's nearly 6% of all the cash held by S&P 500 companies.
And yet Alphabet doesn't pay a dividend at all. That's a strange omission as Microsoft, which has less cash ($106.6 billion) yields 1.1%. And outside of technology, some S&P 500 stocks with much less cash than Alphabet yield much more. Exxon Mobil, for instance, yields 3.3%, and Chevron yields 3.7%.
But until investors pressure companies to return their cash, it looks like they're in no hurry to do so.
Richest S&P 500 Companies
Ended year with most cash and investments
| Company | Ticker | Cash and investments (in billions, 2022) | Sector |
|---|---|---|---|
| Apple | $165.5 | Information Technology | |
| Alphabet | 144.3 | Communication Services | |
| Microsoft | 106.6 | Information Technology | |
| Amazon.com | 72.8 | Consumer Discretionary | |
| UnitedHealth | 71.6 | Health Care | |
| General Electric | 66.4 | Industrials | |
| Exxon Mobil | 64.4 | Energy | |
| Chevron | 63.1 | Energy | |
| Meta Platforms | 46.9 | Communication Services | |
| Elevance Health | 40.0 | Health Care |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
