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 GM to compete in the electric car market. Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Sep 18, 2013
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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