Corporate Cash Hoards Unlikely to Shrink Soon

Corporate America is sitting on a record stash of cash -- $1.74 trillion to be exact – and companies aren’t looking to spend that money anytime soon.

That’s more out of fear than greed, The Wall Street Journal reports. Companies are concerned about Europe’s financial crisis, the global economic slowdown, and the volatility of financial markets.

So they don’t want to risk problems gaining access to cash when they need it.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

"What I don't want to find is that we're held hostage to financial markets when we have a funding need," Tony Trunzo, chief financial officer of Flir Systems, which makes thermal-imaging equipment, tells The Journal.

Companies indeed faced that problem during the financial crisis of 2008-09. "Having cash reserves now is more important than at any time since 2008," Trunzo says.

Aluminum titan Alcoa is holding a record cash supply of almost $2 billion. And that won’t change “as long as conditions remain as they are," the company’s CFO Charles McLane tells The Journal.

That could easily be a few more years, given that most experts anticipate it will take that long for the economy to fully recover from the financial crisis.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

There is a silver lining to the cloud: the hefty cash coffers enable companies to increase their dividends.

“Given underlying fundamentals, low payouts and [high] cash reserves, we expect 2012 to set a record high for cash dividend payments,” S&P’s Howard Silverblatt tells The Toronto Globe and Mail.