Microsoft in $40bn share buyback

Microsoft’s board has authorised the buyback of an additional $40bn (€36bn) of stock on top of an existing $40bn repurchase initiative it will finish by year’s end, keeping up a strategy of returning money to shareholders as its cash pile grows.

The Redmond, Washington-based software maker also raised its quarterly dividend by 8.3% to 39c per share, earlier this week.

The company’s stock has jumped 31% in the past year, giving Microsoft a market capitalisation of $442.7bn — the third-largest in the Standard & Poor’s 500 Index.

Chief executive Satya Nadella has been working to jump-start revenue growth — which analysts project will be 2% this fiscal year after a decline of 2% the previous year — amid continued restructuring efforts related to the failed acquisition of Nokia Oyj’s phone business.

Since Mr Nadella took the helm in 2014, the company’s cloud and internet-based Office software businesses have fuelled growth and boosted investor optimism. The stock this year has been hovering close to a 1999 record high.

“This reflects a continuation of the company’s pledge of returning value to shareholders via dividends and buybacks,” said Sid Parakh, a fund manager at Becker Capital Management, which owns Microsoft stock.

“This implies continued confidence in current and future business trends.”

Given Microsoft’s “debatable history with acquisitions,” this kind of capital-return programme signals to investors that the company is being disciplined in how it spends money, Mr Parakh said.

Microsoft had $113.2bn in cash and short-term investments as of the end of June.

The company is spending about $26bn to acquire LinkedIn, a deal that will be largely funded by debt sales.

On a percentage basis, Microsoft’s dividend increase this year was smaller than the 16% increase the previous year.

Prior to this week’s announced change, Microsoft’s 2.53% dividend yield ranked number 19 of the 30 members of the Dow Jones Industrial Average, according to data compiled by Bloomberg.

Tech companies in the index that offer a larger dividend yield include Intel, Verizon, IBM and Cisco Systems.


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