Firms are sitting on more money in their corporate bank accounts than ever before. What will they do with all the extra cash? Michael Thompson, managing director of valuation and risk strategies at Standard & Poor’s, shared his insights.
“We’ve seen that special dividend announcements* have almost doubled the same period last year,” Thompson told CNBC.
“But that’s not necessarily a positive sign, because it’s saying that [companies] may not have as good a use for the cash as [investors] might, or they can’t invest it and get the kind of returns that investors expect,” he explained.
A lot of the money on the sidelines will also eventually spark things such as deals, longer-horizon dividends and stock buybacks, added Thompson.
* when a company gives a one-time dividend.
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Scorecard—What He Said:
- Thompson's Previous Appearance on CNBC (Oct. 7, 2010)
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More Market Analysis:
- This Is a 'Slow, Steady Recovery': Kotok
- Dennis Gartman Names His Top 3 Trades for 2011
- Use Pullback as 'Buying Opportunity' Into Year-End: Strategist
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CNBC Data Pages:
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CNBC Slideshows:
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Monday's Top Dow Laggards (as of this writing):
Hewlett Packard
Caterpillar
Boeing
Chevron
United Technologies
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Disclosures:
No immediate information was available for Thompson or his firm.
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