What to Do With All This Cash?

One of the most positive signs for the economy remains the amount of cash that American corporations have on hand. The companies in the S&P 500 had $1.3 trillion in cash or cash equivalents at the end of 2013. That is not only an all-time record, but it's the sixth straight yearly high. As recently as 2008, the S&P 500 companies had $650 billion in cash - half of what they have now.

What could they do with all that cash? Eventually, one would think it would manifest itself in one of these ways:

• Businesses could decide to expand, building new physical plants and hiring more workers. In addition to making the business grow, this would also help the American economy grow.
• Corporations could institute share buybacks. The upshot of this is that there are fewer shares then outstanding in the market, which drives the price of each share up.
• Stocks could pay increasingly large dividends. Dividend-paying stocks have become more prevalent in recent years; more than 400 of the 500 stocks in the S&P index now pay dividends, which is a record high.