It comes via RBC capital:
From a flows perspective, capital expenditures are being surpassed by internally generated cash flows at a quarterly annualized rate of ~$200 billion. Thus, companies are still adding significantly to their $1.9 trillion cash mountain.
Keep in mind the top-heavy concentration of these flows. This financing gap has been negative for the last three years. RBC notes that corporates have continued to increase buybacks and dividends, which combined are now outpacing earnings:
They’re even tapping debt markets to do it, some of which might be explained by the share of cash that companies hold overseas.
But given the amount of cash these companies are generating over and above capex, there’s a good chance this will continue until either margins start falling (a possibility that’s been the source of much commentary lately), or until the recovery accelerates well beyond its current pace and corporates find more productive uses of their cash. Or both — they’re not mutually exclusive. And if expectations of a faster recovery take hold, companies might correspondingly increase their capex and hiring, with margins then declining for reasons that would be healthy for the economy.
Whatever happens, that is still an awful lot of liquidity in search of investable ideas.
Full note, including a breakdown by sector, in the usual place.
A US corporate cash update – FT Alphaville