Microsoft Plans $40 Billion Stock Buyback and Raises Dividend
Microsoft Plans $40 Billion Stock Buyback and Raises Dividend : Rise in Tech giant’s quarterly payout to 39 cents from 36 cents represents an increased dividend yield to 2.7%. Microsoft Corp. announced plans to buy back up to $40 billion in stock and boost its dividend by 8%, the latest in a series of moves by the software giant to share a steady flood of cash with shareholders.
The latest repurchase target is the same size as a buyback plan announced in 2013, which the company said Tuesday it expects to complete by the end of this year.
Microsoft didn't set an expiration date for the new buyback, which represents about 9% of Microsoft’s market value of $442.7 billion. The company has been among most active in buying back shares, having spent nearly $140 billion on the tactic over the years.
Microsoft tends to announce dividend increases in September. The 8% increase announced Tuesday is a smaller rate of increase than those of recent years. Last year, the company raised its quarterly payout by 16% to 36 cents from 31 cents, after an 11% increase in 2014.
This year’s increase, to 39 cents per quarter, from 36 cents, raises Microsoft’s dividend yield to 2.7% from 2.3%. The dividend is payable Dec. 8 to shareholders of record Nov. 17. Microsoft, based in Redmond, Wash., enjoyed torrid revenue growth in the 1990s fueled by the spread of personal computers. After its growth slowed, the company began offering increasingly generous dividends as well as buybacks. The latter tactic tends to prop up a company’s stock price by reducing total shares outstanding, thereby increasing earnings per share.
Though a slowdown in unit sales of PCs has tended to hurt sales of Microsoft’s Windows operating system, the company sells other software and services that generate a steady flow of cash. Microsoft reported $113 billion in cash and investments at the end of June. Meanwhile, investors have become more optimistic about the company’s plans to build a big business in cloud services since Satya Nadella took over as chief executive in February 2014. Underscoring his bet on services, Microsoft agreed in June to buy professional social network LinkedIn Corp. for $26.2 billion.
The company’s shares are up 31% over the past year. They rose 1%, or 54 cents, in after-hours trading. In 4 p.m. trading, Microsoft shares fell 12 cents, to $56.81.
Strength in Microsoft’s cloud business helped the company beat sales and profit expectations in its fiscal fourth quarter, which ended June 30, although revenue fell 7% to $20.61 billion.
Brad Reback, a Stifel Nicolaus & Co. analyst, called the stock buyback in line with expectations. He said the dividend increase was the smallest since 2010, but in line with expectations given the LinkedIn acquisition.
Source : http://www.wsj.com/articles/microsoft-plans-40-billion-stock-buyback-and-raises-dividend-1474404013