In a continued effort to increase shareholder benefit, Microsoft has announced plans to buy back up to $40 billion in stock. This is the second such program and will be complimented by a dividend increase.
Dividend per share will increase from $0.36 to $0.39 for the quarter, a boost of 8%. The move is likely a bid to make the company look more attractive to investors while also rewarding employees paid in shares. The yield will increase to 2.7% from 2.3%, and will come to shareholders on 8th December.
Previous Dividend Raises and Stock Buyback
However, the dividend increase is not as substantial as previous years. In 2015, it rose by 11%, while just last year we saw a growth of 16%.
This isn’t the first time Microsoft has launched the stock buyback scheme, either. The company launched a similar size scheme in 2013, which officials say will complete by the end of the year. In total, the company has spent almost $140 billion on this tactic.
Though the 2013 initiative had a definite end date, this one is much more open. No specific time period has been set for the buyback of around 9% of the company’s market value.
According to Stifel Nicolaus & Co analyst Brad Reback, the buyback is “within expectations.” The dividend increase is small this year, but Reback says this is natural given the LinkedIn acquisition.
The Redmond giant bought LinkedIn for a huge $26.2 billion in June, its biggest acquisition to date. Some investors criticized the investment as an overpayment, considering the networking sites annual loss of $166 million that year.
Despite this, Microsoft’s shares are still looking healthy, with a 31% year-on-year increase and an initial spike of 1% following the announcement. It sat at $57.75, a figure not too far off the company’s high of $58.37 in 1999.