NEW YORK — In a year when American companies piled up record amounts of cash, the worst stocks were the savers, and the best gave the money back to investors with dividends and buybacks.
Companies that hoarded cash such as CareFusion, Western Digital and 18 other members of the Standard & Poor's 500 Index lost an average 15 percent in 2011, according to data compiled by Bloomberg.
The 40 companies that repurchased the most stock or offered the biggest dividends climbed 5.7 percent, led by DirecTV and Reynolds American, the data show.
Bulls say gains in companies that returned money will help unlock almost $1 trillion of cash that chief executive officers have been hoarding for three years. Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase, says distributions should increase 28 percent to $1.1 trillion into next year. Bears say dividends and buybacks will be insufficient to keep the rally going as mandated budget cuts curb growth.
"Investors are more yield-hungry than ever before," said Jacob de Tusch-Lec, a London-based money manager at Artemis Investment Management. "Because of the market we are in, investors have flocked to companies that are the best in the world at what they do, generate excess cash and have a proven record of returning money."
The S&P 500 fell 2.8 percent to 1,219.66 last week, the first weekly decline since November. While the index has lost 3 percent for 2011, it has swung from an 8.4 percent gain in April to a 13 percent loss in October.
Companies built reserves as stocks sank and forecasts for growth in U.S. gross domestic product next year slipped from 3.3 percent in February to as low as 2 percent in October. Cash at companies excluding banks, utilities, truckers and automakers rose to a record $998.9 billion last quarter, according to S&P.
Hoarding money hasn't paid off in the market. A group of 20 companies that increased cash and short-term investments the most in 2010 lost 15 percent this year, according to data compiled by Bloomberg. The data excludes companies that increased buybacks or dividends in 2011 or spent the most on capital investments last year.
At the same time, the 20 nonfinancial S&P 500 companies that spent the most to repurchase shares last year advanced 6.3 percent. Those that had the biggest dividend increases relative to their operating cash level rose 5.1 percent, according to data compiled by Bloomberg. There are 312 nonfinancial companies in the S&P 500 that pay dividends, and all but six raised or maintained them in the past year, according to data compiled by Bloomberg.
"Companies that are just building cash, they're looked at as not taking any risk," said Eric Green, a fund manager at Penn Capital Management. "If they're not going to expand, they might as well be paying it out."