The pay-out could take the form of a special dividend, a share buyback or at the very least a more progressive dividend policy. Argos shares on Friday reached an all-time high of 640p, as speculators bet on a bumper pay-out.
The Argos board has been considering a cash handback for some time, and chief executive Mike Smith has indicated the company would come to a hard decision by the spring of 1996.
Argos has been piling up cash at the rate of pounds 50m a year and has been unable to find new areas in which to invest it. A plan to diversify into furniture retailing - the Chesterman's chain - ended in failure and cost pounds 12.5m.
A new discount format, First Stop, is having a trial run in north London but, even if Argos decides to roll it out, it is unlikely to absorb more than a fraction of the available cash.
Another possibility is an acquisition. Henry Blyth, an analyst with stockbroker Gilbert Elliott, said: "There have been strong rumours lately that the company is very interested in parts of Signet [formerly Ratners], which would chew up about pounds 300m. If it did do that, or something similar, then the pressure would be off for it to return cash to shareholders."
Another analyst was cautious about any cash pay-out, pointing out that although the cash pile reached pounds 250m at the December year-end, it actually averaged only pounds 180m.
But analysts at NatWest Markets said: "Some form of progressive, if not special, dividend policy is certainly probable. The market's attention is heavily focused on Argos's cash pile and the potential for some form of redistribution."
NatWest said a special dividend of 30p a share would cost pounds 90m. But it added: "More likely, we sense, is a more progressive dividend policy."
NatWest forecasts a 1995 pre-tax profit of pounds 120m with a dividend of 12.8p. Union Bank of Switzerland is more bullish, predicting pounds 122.5m for 1995, rising to pounds 140m in the current year.
Argos has delivered impressive sales growth in recent years. In the five weeks to Christmas, it reported a 14 per cent increase in revenues, 8 per cent of it from existing stores.