U.S. companies are gradually recovering their investment activity, but the investment expansion phase from 2012 to 2016 still seems a long way off.
Investment Activity Trends
Over the past 12 months, the largest publicly traded U.S. non-financial companies spent 5.8% of their revenue on capital expenditures. Excluding commodities companies, it was 4.7%, and excluding technology companies, it was 5.5%. For trading companies (both wholesale and retail), the number was determined using data obtained from their internal company reports.
How significant is the deviation from the norm? If we consider all non-financial companies, the current investment activity (capital expenditures to revenues) is only 2.1% below the average for 2017 - 2019, 7.6% below 2012 - 2016, but 8% above 2014 - 2017. This analysis excludes the periods of crises (2008 - 2009 and 2020) and post-crisis recovery (2010 - 2011 and 2021).
There is substantial differentiation within sectors. For instance, the oil and gas industry exhibits an extreme contraction in investment activity, with a decline of 37% from 2012 - 2016 levels. Manufacturing and technical services show a 45.4% contraction, healthcare shows a 31.2% contraction, and consumer durables show an 18% contraction.
Shareholder Value Allocation
How aggressively are U.S. companies returning value to shareholders through dividends and share repurchases?
The results are intriguing. Shareholder spending (comprising dividends and net repurchases) decreased from $333 billion in Q1 2022 (an all-time high) to $273 billion in Q3 2023, but this remains well above the quarterly average of $210 billion in 2019.
Over the past 12 months, all U.S. non-financial companies allocated $1,132 billion to shareholder policies, according to proprietary calculations based on corporate statistics.
Currently, across all U.S. companies, 6.5% of revenue is allocated to shareholder policies. Excluding commodities companies, it's 6.3%. Excluding technology companies, it's 5.3%, and excluding trading companies, it's 8.1%.
Conclusion
U.S. non-financial companies are gradually increasing their investments, devoting 5.8% of revenue to expenses. Excluding commodities and technology, this drops to 4.7% and 5.5%. This is 7.6 % less than in 2012 - 2016, but 8 % more than in 2014 - 2017, excluding crisis and recovery periods. Some sectors, such as oil and gas (- 37 %) and manufacturing (- 45.4 %), experienced significant declines.