Microsoft today announced plans to boost its quarterly dividend to 20 cents, a 25 percent increase, returning to shareholders a larger piece of the company’s still-growing cash pile. For all the hand-wringing that goes on about Microsoft’s future these days, its balance of cash and short-term investments finished the recent fiscal year at $52.8 billion, up from $36.8 billion at the same point the previous year.

“Our strong financial results enable us to increase our dividend as part of our ongoing commitment to return capital to our shareholders,” said Peter Klein, the company’s chief financial officer, in a news release announcing the higher dividend.

Bloomberg News explains that Microsoft is hamstrung in part by the fact that much of its cash is overseas, which would require it to pay taxes if it needed to bring money back into the country to pay a higher dividend.

Microsoft said in the news release that it’s continuing its $40 billion share repurchase program approved by its board in September 2008, running through September 2013. About $12.2 billion was left to repurchase under that authorization as of June 30.

Comments

  • Bob

    Interesting. I’m a little surprised to see an increase this large amid all the global economic and financial system concerns, worries about a double-dip US recession, and fears about MS’s future in a so-called “post-PC” mobile and cloud era that others now dominate.

    Is this just business as usual, a suddenly more bullish or bearish outlook by management, or the cost extracted by David Einhorn and other influential owners in return for not having Ballmer removed at the upcoming shareholder meeting?

    • Guest

      What’s the bearish interpretation?

      • Bob

        A higher dividend could cushion the fall if they’re worried about not making their numbers. Turner seemed optimistic about those last week, but then again MS’s senior management tend to be permanently over confident.

  • Guest

    Congratulations and thank you to Microsoft for continuing to reward loyal shareholders with low-tax dividend payments!

    • Fail

      And stock price decreases.

      • Guest

        Fred, please bing how dividends work. When a company pays a dividend, the share price decreases by that amount. This enables a shareholder to “double-dip”: he receives a cash payout taxed at only 15% (less than what my secretary pays in income tax) and the shareholder can sell the shares at a loss, which counts against his income, so he gets a tax refund.

        Double dipping, Fred. Savour the tax advantage that makes the United States such a great country for financially savvy individuals like myself.

        • Anonymous

          Too bad there is such ignorance out there.  See my previous comment about “your” secretary’s tax rate.

          Also, since the stock was most likely held for a while, it’s probably a long term loss which doesn’t offset income but can only offset long term gains.  Not exactly the easy money scenario you posited.

          • Guest

            Thank you, Joe, for the opportunity.

            “If your capital losses exceed your capital gains, the amount of the excess
            loss that can be claimed is the lesser of $3,000, ($1,500 if you are married
            filing separately) or your total net loss as shown on line 16 of the Form
            1040 Schedule D, Capital Gains and Losses. If your net capital loss
            is more than this limit, you can carry the loss forward to later years. Use
            the Capital Loss Carryover Worksheet in Publication 550, to figure the amount
            carried forward.”

            I’m glad I was able to improve your knowledge, Joe.

          • Anonymous

            dude, you can’t use it to offset your ordinary income, just cap gains.

        • Fail

          Guest, please Bing how stock returns work. Total return = stock increase/decrease + dividends (if any). There is no rule that says a stock must dip every time a dividend is paid. MS frequently does and so do some utility stocks, but there are numerous examples every day of stocks that don’t. The scenario you describe of receiving a dividend and then selling the stock for a tax loss isn’t applicable to the long term shareholder, the oft cited target of management’s efforts. And of course a significant portion of MS’s owners are foreigners and don’t have that same tax system. Markets are global these day, Guest, in case you’re confused.

          And if you would be so kind as to run the equation above, which I have helpfully provided you, you will see that MS shareholders have lost money so far this year, most others, and for the entire period since Ballmer took over, inclusive of dividends.

          I’m sure a financially savvy individual such as yourself can appreciate that long term investors buy stocks to make money, not lose it.

  • Guest

    Congratulations and thank you to Microsoft for continuing to reward loyal shareholders with low-tax dividend payments!

  • Guest

    Congratulations and thank you to Microsoft for continuing to reward loyal shareholders with low-tax dividend payments!

  • Guest

    Congratulations and thank you to Microsoft for continuing to reward loyal shareholders with low-tax dividend payments!

  • Anonymous

    As a shareholder, I appreciate the div increase.  I have no plans to sell the stock since at the current price the yield is >3% at a favorable tax rate. 

    As to “paying a lower tax rate than my secretary”.  Why is that bad?  I’m risking my capital, why should I get taxed at a higher rate when my secretary risks nothing.  

    By the way, those in the likely tax bracket of the hypothetical secretary are paying less than 15%.  Forget about marginal tax rates, look at the actual tax paid divided by AGI. 

    • Guest

      Hey, maybe one of these years the dividend will be high enough that it’ll even overcome the stock drop and you’ll end the year with a net increase in value. Nah, what was I thinking…

    • Mark

      “I have no plans to sell the stock since at the current price the yield is >3% at a favorable tax rate.”

      Buying or keeping a stock for the dividend is not a good idea. Dividends are discretionary and can be reduced or even canceled completely at any time if the company’s business deteriorates. MS isn’t a utility with little or no competition. They’re in one of the most competitive and obsolescence prone industries In the world. And given how badly they dropped the ball in mobile and tablets, there’s at least room for concern about their ability to succeed in the future.

      MS’s stock has been a dog for so long that it’s now a petrified dog. It’s down 6-7% again this year, while even IBM is up 16-17%. Unless you think it’s magically going to reconstitute and get back into the hunt, the 3% will be small reward for the much larger ongoing decline in share price.

  • Suckas

    And gives back more than a year’s worth of dividends the very next day. Man what a terrible stock and management.

  • Suckas

    And gives back more than a year’s worth of dividends the very next day. Man what a terrible stock and management.

  • Brent

    Based on today’s precipitous 3.67% drop, it appears a lot of people were waiting for them to shoot all their BUILD and dividend bullets before re-shorting the stock.

  • Brent

    Based on today’s precipitous 3.67% drop, it appears a lot of people were waiting for them to shoot all their BUILD and dividend bullets before re-shorting the stock.

  • http://twitter.com/fillupt Philip Turnbull

    That’s a lot of EU countries MS could bail out!

  • Guest

    5 more quarters of future dividends lost today. Joining the 4+ yesterday. MS -7% for the year. Apple +28%. LOL.

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