"Finally, as the last four charts below show, business fixed investment in tangible capital hasn’t been declining because of lack of cash flow, but rather because businesses have preferred to save profits in order to to distribute them to shareholders in the form of dividends and stock buybacks, or invest in R&D. Indeed, the operating cash flow margin for the largest 85% of companies in the United States is at a two-decade high (chart 1), but capex as a percent of operating cash flow is near a two-decade low (chart 2) while dividends and buybacks have been up every year since 2011. Meanwhile, R&D investment as a percent of operating cash flow (chart 4) has been up every year since 2011. This suggests to us that tangible capital investment is a much lower priority to companies than paying shareholders and investing in R&D. Increasing the marginal return on tangible capital investment may be unlikely to change this trend."
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