(Bloomberg News) U.S. 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 $257 billion this quarter, the most since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to data compiled by Bloomberg. Standard & Poor's 500 Index companies authorized 38% 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 Inc. 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 U.S. 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."
More takeovers were announced last week than any time since March 2010 after AT&T Inc. in Dallas offered $39 billion for Bonn-based Deutsche Telekom AG's U.S. wireless unit and San Francisco-based Charles Schwab Corp. agreed to buy OptionsXpress Holdings Inc. of Chicago for $1.11 billion in stock. Cisco Systems Inc., 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.
Companies in the S&P 500 have been piling up money for two years as per-share profit jumped 36% in 2010, the most in more than two decades, data compiled by Bloomberg show. The world's largest economy is forecast to expand 3.1% this year, the fastest annual pace since 2005, based on the median estimate from 68 economists surveyed by Bloomberg.
The rate of U.S. growth in the fourth quarter was revised to 3.1% from 2.8% and consumer sentiment dropped more than forecast in March, according to reports on March 25. The Labor Department may say this week that U.S. unemployment remained at 8.9% in March, according to the median economist estimate tracked by Bloomberg.
The S&P 500 gained 2.7% to 1,313.80 last week, reducing its decline from a 32-month high of 1,343.01 on February 18 to 2.2%. The benchmark gauge for American equities had fallen 6.4% through March 16 as investors speculated Japan's earthquake would cripple its economy and uprisings in Libya and Egypt spurred concern fuel costs will stoke inflation. The stock index advanced 0.3% to 1,318.16 at 9:54 a.m. New York time today.