US executives are starting to spend the record $940 billion in cash they built up after the credit crisis, just in time for annual shareholder meetings.
Takeovers topped $256 billion this quarter, the most since the collapse of Lehman Brothers Holdings in September 2008, according to data compiled by Bloomberg. Standard & Poor’s 500 Index companies authorised 38 per cent more buybacks in 2011 than a year earlier and dividends may increase to a record $31.07 a share in 2013, data compiled by Birinyi Associates and Bloomberg show.
Chief executive officers are looking for ways to increase investor returns after posting the biggest gain in profits since 1988 by relying on near-zero Federal Reserve interest rates and cost cuts that have kept the unemployment rate near a 26-year high. More than 139 companies in the US equity benchmark index are preparing for shareholder meetings in the next two months after the S&P 500 almost doubled in the past two years and as profits approach a record.
“Shareholders have raised the bar,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $45 billion. “Companies are going to have to find ways to generate more return,” he said. “The idea of sitting on idle cash in a zero interest rate environment is increasingly viewed as a nonviable option.”
AT&T, Schwab
More takeovers were announced last week than any time since March 2010 after AT&T in Dallas offered $39 billion for Bonn-based Deutsche Telekom’s United States wireless unit and San Francisco-based Charles Schwab Corp agreed to buy OptionsXpress Holdings of Chicago for $1.11 billion in stock. Cisco Systems, the world’s largest maker of networking equipment, said on March 18 that it will pay a quarterly dividend for the first time of 6 cents.
