5 Companies That Will Benefit From Higher Interest Rates

Sergey Brin, left, Larry Page, and Eric Schmidt, chairman and chief executive officer of Google Inc., speaks inside the inn during a press conference at the 28th annual Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Thursday, July 8, 2010. Allen & Co., the boutique New York investment bank, invites executives from start-ups in media and technology to mingle with bankers and moguls at the event. The mixture, along with presentations trumpeting new business models, has led to acquisitions and investments in the past. Photographer: Matthew Staver/Bloomberg *** Local Caption ***
Getty Images
The stock market fell sharply right after the Federal Reserve's announcement of its long-range plans to ease away from the programs it put in place keep the money supply loose and stimulate economic growth. Yet even as investors fear the impact of higher interest rates on the economy, many companies are already prepared with massive amounts of cash on their balance sheets.

For those companies -- and investors in their stock -- higher interest rates could bring better earnings without any extra effort at all.

Keeping Their Cash

U.S. corporations have boosted the cash on their balance sheets to record levels. As of the end of 2012, companies outside the banking and financial sector held $1.45 trillion in cash, according to Moody's -- $130 billion more than at the end of 2011. Moreover, 58 percent of that money -- a whopping $840 billion -- is held outside the U.S., kept there so the companies can avoid paying U.S. taxes on it.

With interest rates recently at rock-bottom levels, companies haven't been able to earn much income from their cash hoards. But rising rates could help them in that regard, boosting their total investment income and potentially even having a detectable impact on their bottom lines.

Let's take a closer look at some companies with exceedingly large cash stashes and see why they should be rooting for the Fed to move faster in getting interest rates back to more normal levels.



Motley Fool contributor Dan Caplinger owns shares of Apple. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, Microsoft, and Oracle. Try any of our newsletter services free for 30 days.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:
randy

It Sucks

June 21 2013 at 3:46 PM Report abuse rate up rate down Reply
mike at home

Another old saying a dollar saved is a dollar earned thank you

June 21 2013 at 2:37 PM Report abuse rate up rate down Reply
Jeff W.

these are all companies with a ton of cash, companies/people/countries with a fixed rate debt will benefit too!

June 21 2013 at 10:59 AM Report abuse rate up rate down Reply