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"Companies Are Simply Flush With Cash"

By Jim Cramer
RealMoney Columnist
3/24/2010 10:00 AM EDT

"Starbucks (SBUX - commentary - Trade Now) and ConocoPhillips (COP - commentary - Trade Now) on the surface have little to do with each other. Coffee and oil/gas. But this morning both companies announced big dividends and buybacks, and they are reminders of something we keep forgetting around here: Corporations are swimming in cash. Even ones with growth opportunities like Starbucks, which is returning 40 cents a share in dividends.

In previous recessions we saw companies strapped with so much debt that they were furiously cutting dividends and trying to get a lifeline out there. We've had some examples of that behavior this time around, like U.S. Steel (X - commentary - Trade Now), Dow (DOW - commentary - Trade Now) and International Paper (IP - commentary - Trade Now), which had some unfortunately timed acquisitions. But many companies -- the 3Ms (MMM - commentary - Trade Now) and the DuPonts (DD - commentary - Trade Now), the Caterpillars (CAT - commentary - Trade Now) and the Emersons (EMR - commentary - Trade Now), the Eatons (ETN - commentary - Trade Now) and the Nucors (NUE - commentary - Trade Now) -- had no problem maintaining the dividends, and they came though this period with flying colors.

Now we are seeing the other side of the equation, when business comes back so strong that companies that cut back but did not see a meaningful decline in revenues have too much cash with nowhere to put it.

I always prefer dividends because share buybacks have become tainted in my eyes, as they often seem to be ways to boost earnings to help management, not shareholders. Dividends, with favorable tax treatment if you hold stocks rather than favorable capital gains if you sell stocks, have been a terrific way to invest.

Today's announcements from Starbucks and Conoco are evidence that even with growth prospects or dismantling prospects -- the two respective trends -- there is more than enough money to go around. That's a major reason we have not been hit hard in this market once we saw the bottom in the recession.

It is why we have such a hard time going down now even with the European headwinds and the coming tax changes because of heath care reform. "

(in www.realmoney.com)