Tickers in this Article: BP, TGT, YHOO, PKW, AET, PM
Although the "Chicken Little" attitude on the economy may be paramount in the minds of investors, corporate treasuries are brimming with record amounts of cash, and should be able to withstand a downturn much better than the last one. Many companies have used some of this cash to increase both dividends and buybacks.

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The Data
The Federal Reserve reported that non-financial corporations held $1.84 trillion in cash and liquid assets as of March 30, 2010. This was up 26% year over year and was the largest increase ever recorded, according to the Wall Street Journal. Although data for the second quarter is not yet available, this amount almost certainly increased as companies continue to keep costs down and have not yet initiated major hiring or expansion plans.

Dividends by companies in the S&P 500 were up by 2.4% over the same quarter in 2009. June 2010 dividend payments were up an even stronger 5.7% over June 2009. During the quarter ending June 30, 2010, only 34 companies reduced its dividend, while 335 S&P 500 companies increased dividend payments.

Target Corp (NYSE:TGT) was one of those companies that raised its dividend during the second quarter of 2010. The company increased its quarterly dividend by 47%, to $0.25 from the previous level of $0.17. Target has now paid a dividend every quarter since going public in 1967. The company didn't cite a reason for the large increase in the dividend, but did report cash, cash equivalents and marketable securities of $1.58 billion as of May 1, 2010.

Not all shareholders were so rewarded during the quarter, as many companies reduced dividends. BP (NYSE:BP) was probably the highest profile company to do so, with plans to place most of its cash into an escrow until the company's liabilities for the Gulf of Mexico oil spill are more definite.

Stock Buybacks
Stock buybacks by companies in the S&P 500 totaled $55 billion in the quarter ending March 31, 2010. This was up sequentially from the $48 billion in the last quarter of 2009, and year over year from the $31 billion in the first quarter of 2009. (Find out what buybacks achieve for shareholders in A Breakdown Of Stock Buybacks.)

Data has not yet been released for the second quarter of 2010, but several major companies also announced buybacks during the quarter. Yahoo (Nasdaq:YHOO) was the latest company to find its own stock attractive for purchase, and will spend up to $3 billion to buy back its stock from "time to time" over the next three years.

One method of playing the stock buyback craze for investors that believe that such activity leads to better performance is with the PowerShares Buyback Achievers Exchange Traded Fund (NYSE:PKW). This ETF invests at least 90% of its assets in stocks that correspond to the Mergent Buyback Achievers index, which contains stocks that have repurchased at least 5% of its shares over the preceding 12-month period.

Some of the ETF's top holdings as of March 31, 2010, included Aetna (NYSE:AET), Phillip Morris (NYSE:PM) and DIRECTV (NYSE:DTV).

The Bottom Line
Corporate America is hoarding cash as it continues to worry about a second economic contraction. Many companies are using some of this cash to increase dividends and stock buybacks rather than resume hiring and expand capacity. (For more stock analysis, take a look at Money Is Made In Down Markets.)

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