Microsoft Boosts Dividend, Unveils $40bln Stock Buyback

Microsoft Boosts Dividend, Unveils $40bln Stock Buyback
September 20, 2019


The shares of Microsoft Corporation (Nasdaq: MSFT) rose $2.55 or 1.84% to close at $141.07 after the company authorized the repurchase of another $40 billion shares and raised its quarterly dividend by $0.05 to $0.51 a share. In last six years, for the third time the company has announced a share buyback program of this size. Including yesterday’s rally, the company’s shares have appreciated by over 39% year-to-date. The tech giant has been regularly repurchasing its own shares under CEO Satya Nadella.

In the fiscal year ended June 30th, the company had repurchased $19.54 billion worth of shares. As per SEC filings, Microsoft has $11.40 billion remaining on the buyback program announced in 2016. In 2Q 2019, the company repurchased shares worth $4.60 billion. Between 2017 and 2019, the company had repurchased 419 million shares worth roughly $35.70 billion. The latest share buyback program has no expiration date, but can be canceled at the will of the company.

In the prior fiscal year, Microsoft bought back shares worth $10.72 billion. That is also one of the reasons the stock quadrupled in the past five years and reached a market capitalization of $1.084 trillion.

In 2003, the Redmond, Washington-based firm paid dividend for its shareholders for the first time. Since then, the company has been raising quarterly dividend almost every year. A year ago, the company had announced a dividend hike of $0.04 per share. That took the quarterly dividend to $0.46 per share at that time. Yesterday’s announcement of $0.51 per share dividend is $0.02 per share higher than Consensus estimate of three analysts surveyed by FactSet.

Microsoft will be paying the dividend on December 12th for shareholders on record as of November 21st. The dividend has doubled from what it was when Satya Nadella took the helm from Steve Ballmer. Thursday’s closing price of $140.78 implies a dividend yield of 1.44%, lower than the 1.93% yield of the S&P, as per FactSet.

The cloud division of the company continues to grow at a brisk pace while increasing number of customers sign up for Office 365. The profitable Windows business has turned stable as customers move to newer versions. The latest buyback announcement is expected to keep the stock bullish in the short-term.

Technically, the stock continues to receive support from the 50-day moving average. Additionally, the stochastic indicator is in the bullish region. As a result, we can expect the stock to rally in the short-term.

msft - technical analysis - 20th Sept 2019

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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