Microsoft (MSFT) Increases Dividend, New Stock Buyback Program
Shares of Microsoft Corp. (MSFT) closed up +0.13 or +0.39 percent to $32.93 per share on Tuesday, after the company announced it would boost its dividend by 22 percent and begin a $40 billion stock buyback program. The new buyback program will replace the $40 billion buyback program that expires on September 30th. The 0.05 cent increase in Microsoft's quarterly dividend brings it up to $0.28 per share, which will up the yield for investors holding the stock to 3.4 percent, making it competitive with the 2.85 percent yield on 10-year U.S. Treasuries.
The increased dividend will be paid on December 12th to holders of record on November 21st. Daily Chart
Redmond, Washington based Microsoft Corporation is the world's largest manufacturer of computer software. In addition to the buyback program and the dividend increase, Microsoft has had several recent developments which will affect its stock price. Earlier in September, the company announced it would purchase Nokia's (NOK
) smartphone business to catch up with the move to mobile computing. The deal is valued at $7.2 billion. Two other developments were Chief Executive Officer Steve Ballmer announced his retirement and the Microsoft board agreed in giving a seat to activist investor ValueAct Capital. Microsoft's move to give shareholders more for their investment comes at a time that the world's largest software maker has come under considerable pressure. Despite the company continuing to show profits, the industry dynamic has changed from people using traditional desktop and laptop computers to using mobile devices, tablets and smartphones. According to analysts, the $0.05 cent increase will cost the company an additional $416 million per quarter based on the roughly 8.33 billion shares outstanding. So far, Microsoft has earned $21.9 billion in this fiscal year including $5 billion in income in the last quarter, leaving the company with a cash position of $77 billion on their balance sheet. The new stock buyback program, which replaces one that expires at the end of September, will have no expiration date. Microsoft Chief Financial Officer Amy Hood stated that, "These actions reflect a continued commitment to returning cash to our shareholders." In related news, Microsoft has sent out invitations to a September 23rd event to be held in New York City, where it is expected to unveil the company's new Surface tablet. The company hopes to compete with Apple (AAPL
) iPads and Android devices which currently dominate the market. Microsoft stock has not reacted as favorably to the news as one might expect. This could be in part because of the Nokia deal struck earlier this month. Many investors are questioning the logic behind the purchase of Nokia's smartphone business and whether a presence in the business could favorably affect its software. Microsoft has adapted to a changing market before. Time will tell if the current changes will benefit the company's stock price in the long run. So far though, Microsoft stock is still up almost 30 percent this year. Other News About MSFT Microsoft Rushes Urgent Fix for Internet Explorer
Microsoft sends out a critical fix for Internet Explorer. AT&T Signs Deals With Microsoft, America Movil
AT&T to sell cloud services using Microsoft Azure software. Other Stocks in the News AIG Focuses on Risk as Pricing Power Limited, Chairman Says
Insurer focuses on market share, unable to charge more for coverage. GM Takes Aim at Tesla With Cheaper, Long-Range Electric Car
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Published on Sep 18, 2013
By Jay Hawk