Cash-Rich Companies
They may not be Microsoft, but these firms are consistent cash-makers.
They may not be Microsoft, but these firms are consistent cash-makers.
No other firm can match Microsoft's (MSFT) cash hoard--or its recently announced plan to distribute a $32 billion special dividend to shareholders. But lesser lights that consistently throw off excess cash still hold appeal for investors; these companies can use the cash to invest in future growth, pay dividends, or buy back shares. In this week's Five-Star Investor, we'll focus on companies with hefty amounts of cash on their balance sheets, as well as a consistent record of generating extra cash.
To start, we used Morningstar.com's Premium Stock Screener to home in on companies with net cash (cash minus long-term debt) equivalent to at least 30% of their market capitalizations. We also looked for cash stakes that translated into at least 40% of total assets, as well as a record of generating free cash flows equal to at least 5% of sales for each of the past three years. Close to 50 companies made the final cut as of July 30. Here are some of the highlights:
BEA Systems
Morningstar Rating: 5 Stars
Business Risk Rating: Above Average
From the Analyst Report: "The balance sheet is solid, with more than $700 million in cash (net of debt). Also, BEA generates lots of cash, which it uses to buy back stock and make acquisitions."
NetIQ
Morningstar Rating: 5 Stars
Business Risk Rating: Average
From the Analyst Report: "Almost half of NetIQ's market capitalization is made up of cash, and 40% of its sales come from recurring maintenance, which is unlikely to go away. A compelling argument to buy the stock could be made on these facts alone."
Advanced Fibre Communication
Morningstar Rating: 4 Stars
Business Risk Rating: Average
From the Analyst Report: "Advanced Fibre Communications isn't glamorous, but its appealing niche and cash war chest merit attention."
QLogic
Morningstar Rating: 4 Stars
Business Risk Rating: Above Average
From the Analyst Report: "With nearly $8 per share in cash and no debt, the balance sheet is in outstanding shape. Our only worry is that such a massive amount of cash is a drag on returns on invested capital, one of our key valuation drivers."
Siebel Systems
Morningstar Rating: 4 Stars
Business Risk Rating: Average
From the Analyst Report: "The balance sheet is pristine, with more than $2 billion in cash and minimal debt. Siebel tends to hoard cash rather than buy back stock or make large acquisitions."
To run this screen yourself and see all the stocks that passed, click here. The stocks mentioned above passed our screen as of July 30. The results of the screen may change because of daily price fluctuations or other factors. After clicking, you can save the search to use later by clicking the "Save Criteria" button in the bottom right-hand corner of the screen. (Note: You will need to be logged in as a Premium Member to view and save the complete screen.)
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