Debt has long been a way for corporations to boost returns to shareholders, but recently debt has been shunned by corporate America. According to a recent report from JPMorgan, since 2008, the ratio of total debt to total equity on the S&P 500 has dropped from a 20-year average of 171% to just 104% in the third quarter of 2013. Companies are clutching cash and not investing it back in the business, and they certainly don't have a normal appetite for leverage.
One of the reasons the S&P 500's debt has fallen is immense cash-generation from companies like Apple (NASDAQ:AAPL), Cisco (NASDAQ:CSCO), and Microsoft (NASDAQ:MSFT). They have more cash than they know what to do with.
Erin Miller sat down with Fool contributor Travis Hoium to see why leverage is suddenly a bad word in corporate America.
Fool contributor Travis Hoium manages an account that owns shares of Apple and Cisco Systems. The Motley Fool recommends and owns shares of Apple. It recommends Cisco Systems and owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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