Microsoft Announces $40 Billion Buyback and 3.4 Percent Dividend

Jacob Harper |

Facing pressure to return money to shareholders, on Sept 17 Microsoft Corporation (MSFT) revealed a plan to buy back $40 billion in shares and start doling out a $0.28 dividend, constituting a 3.4 percent return. While there is no timeline on the buyback, the dividend – which topped analyst estimates of a dividend increased by 2 cents – will be the second largest among tech companies worth over $100 million, only slightly less than the 3.8 percent paid by Intel Corporation (INTC) .

In June the company first began revealing that a massive change in strategy would be taking place when they unveiled their restructuring as “One Microsoft” as a response to criticism the company was fractured and inter-competitive, and as a result had incubated a toxic corporate culture that stifled innovation.  

Fears the company was stagnating were confirmed on July 18, when the company issued an incredibly disappointing second quarter 2013 earnings report. The report, which included a $900 million writedown on the failure of the Surface RT tablet, caused a 15 percent two-day plunge in the stock that the company still hasn’t fully recouped.

Following the stock plunge, Microsoft has scrambled to try to placate shareholders and retool the company. First came a change in leadership. On Aug 23 much-derided CEO Steve Ballmer revealed he would be stepping down within a year, causing a 6 percent stock spike.

On Sept 3 they announced the purchase of Nokia Corporation (NOK) , making clear their intention to make a play in smartphones, a market in which they have badly lagged.

Now with the buyback and increased dividend, Microsoft is attempting to appeal directly to the pocketbooks of disgruntled long-term investors. Microsoft’s stock is only up 30.37 percent from five years ago compared to a 53 percent gain for the S&P 500. The company is worth 60 percent of what it was in Dec. 1999, when it hit an all-time high of $58.35.

Microsoft edged up on the news of the dividend and buyback, gaining .73 percent to hit $33.04 a share.

 

(image of Microsoft Store courtesy of WIkimedia Commons)

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Companies

Symbol Name Price Change % Volume
INTC Intel Corporation 35.75 0.05 0.14 3,932,561
NOK Nokia Corporation Sponsored American Depositary Sh 4.61 0.03 0.66 2,369,353
MSFT Microsoft Corporation 61.72 0.71 1.16 5,188,960
MICIF MIDLAND IC&I LTD ORD n/a n/a n/a 0

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