Microsoft Corporation announced that its board of directors increased the company’s quarterly dividend and approved a new shares repurchase program. The software giant said in a statement that it plans to repurchase as much as $40 billion in its own shares. Also, the board approved an 8% increase in the company’s quarterly dividend rate.
Share Repurchase and Dividend
The new share repurchase program has no expiration date, and may be terminated at any time, the company said in a statement. The new buyback represents about 9% of Microsoft’s market value of $442.7 billion, The Wall Street Journal reported.
The company’s board declared a quarterly dividend of 39 cents per share, representing a 3 cent or 8% increase over the previous quarter’s dividend rate. The dividend will be paid on December 8 to shareholders of record November 17. The ex-dividend date is November 15.
According to the Journal report, the 8% increase “is a smaller rate of increase than those of recent years.” In 2015, the company upped its quarterly rate by 16% to 36 cents from 31 cents, following an 11% increase in 2014. This year’s increase in dividend to 39 cents per quarter from 36 cents raises the company’s dividend yield to 2.7% from 2.3%, the publication reported.
Stifel Nicolaus & Co. analyst Brad Reback said that the new shares buyback in line with expectations. Given the LinkedIn acquisition, the dividend increase – smallest since 2010 – is also in line with expectations, the analyst said.
During the quarter ended June 30, Microsoft Corporation returned $6.4 billion to shareholders in the form of share repurchases and dividends.
How Microsoft Is Performing
Founded by Bill Gates in 1975, Microsoft is a technology giant with a market cap of over $440 billion. The company has a price-earnings (P/E) ratio of 27.3.
The company’s shares are up 0.89% for the year. The stock has gained over 6.21% in the past six months, and 30.66% in the past 12 months.
In addition to Windows operating system, the company sells other software and services that generate a steady flow of cash. The company reported $113 billion in cash and investments at the end of June.
For the fiscal fourth quarter ended June 30, the software titan reported its financial results on July 19, beating estimates on both the top and bottom lines. The software giant posted earnings per share of $0.69 on $22.64 billion in revenue, versus consensus estimates of $0.58 in EPS on $22.14 billion in revenue. It had $0.60 in EPS on $22.18 billion in revenue in the same quarter a year ago.
Investors seem optimistic about the company’s plans to build a big business in cloud services under the leadership of Satya Nadella. The company’s Intelligent Cloud segment did a great job during the quarter, with Azure revenue increasing by 102%. Intelligent Cloud revenue rose $415 million or 7%, mainly due to higher revenue from server products and cloud services and Enterprise Services. The cloud business helped the company beat sales and profit expectations in its fiscal fourth quarter.
“The Microsoft Cloud is seeing significant customer momentum and we’re well-positioned to reach new opportunities in the year ahead,” CEO Satya Nadella said.