US groups have $2tn to play with this year The biggest US companies may have as much as $2tn in cash available to spend in 2012, powering a potential surge in share buy-backs and dividend payments. A combination of cash on the books plus low levels of leverage and strong expected profits add up to just under $2tn that could be available for non-financial groups in the S&P 500, according to figures compiled by JPMorgan Chase. Amid a struggling global economy, US companies in most industries have been hesitant to launch major new investments or complete large acquisitions, and have been primarily using cash to repurchase their shares and pay dividends. "If more firms were optimistic about the future and seeing new opportunities, this money could go to investment," said Marc Zenner, head of Corporate Finance Advisory at JPMorgan. Doing share buy-backs is a less risky option, especially when valuations are low. It shows capital discipline and enthusiasm about the stock's future, and can also fend off activists," he said. With large, non-bank companies continuing to delever from peak levels in 2007, the average debt-to-earnings ratio of two times is below the 2.4 times average seen from 1996 to 2009. They also have 11.3 per cent of their assets in cash on average, versus 7.3 per cent from 1996 to 2009. If these figures reverted to historical averages, in part through new issuance of debt, it would generate about $1.2tn in cash, JPMorgan said. That would be in addition to roughly $800bn of cash on hand and anticipated 2012 free cash flow. Last year, large US corporates spent $336bn on share buy-backs from the fourth quarter of 2010 through the third quarter of 2011, the most recent quarter for which figures are available, the most since 2007. They also raised dividend pay-outs by 11 per cent in 2011. Some $40bn of those buy-backs were financed by issuance of debt. Fitch Ratings has projected that figure will probably increase this year, as yields for the most creditworthy corporate borrowers are near record lows due to investor demand for the relative safety of bonds. I don't think buy-backs are going to slow. There's so much cash on the sidelines that shareholders want," said Robert Leonard, managing director of the special equity transactions group at Citigroup. Mr Leonard projects that buy-back activity will remain in the $75bn-$100bn a quarter range, and that companies will continue to raise dividends, given investor demand for yield. Groups such as Intel and Home Depot raised debt to fund share buy-backs of more than $2bn last year. Companies that enter 2012 with cash greater than 10 per cent of assets and low debt include many software companies, such as Microsoft and Google, but also groups such as MasterCard, the payment processing firm, and Accenture, the consultancy. Cash spent on shares and dividends has also been a positive factor for the stock market's performance during a volatile year. The $2tn in cash represents some 10 per cent of the market value of large US non-financial groups.