• General
  • September 16, 2021
  • 6 minutes read

Markets: Microsoft Plans $60B Stock Buyback, Raises Dividend

In the stock markets this week, Microsoft the tech giant is among the biggest movers and shakers with actions very…

Microsoft logo

In the stock markets this week, Microsoft the tech giant is among the biggest movers and shakers with actions very favorable to its shareholders. It’s announced a very large stock buyback program as well as raised its quarterly dividend for shareholders.

  • Microsoft has said it’s approved a share buyback program of up to $60bn for an indefinite amount of time, meaning it can prolong for as much as possible but on the other hand get terminated at any date. The move came just on the heels of some US lawmakers proposing to enact a tax on corporate buybacks though it’s not certain that both events are related.
  • Before now, the last buyback program Microsoft announced was for $40bn in September 2019. In the two preceding years before that (2017-2019), the company spent $36bn on share buybacks. 
  • Along with its latest buyback, Microsoft has also hiked its quarterly dividend by 6 cents or 11% over the previous level. Such a dividend hike and a bigger share buyback are like sugar to the bellies of investors, i.e. pleasing. 

  • It appears that Microsoft is very flush with cash and plotting more ways to return some to investors. In this era, buying back shares has become a major way companies return cash to shareholders such that a record $484bn of buybacks were announced by US companies in just the first four months of 2021.

As it’s surged to a record high, buybacks have drawn attention from US lawmakers ever looking for ways to grow the country’s tax income and buybacks have become a target. Recently, some lawmakers proposed a bill to levy a 2% tax on the amount companies spend on stock buybacks each year;

  • It’s one thing to propose but getting the proposal passed and enacted through a vote is another and usually a tough task for lawmakers, so chances aren’t solid that the bill will see the light of passage. It’s then not certain that Microsoft hiked its share buyback in response to the proposal in order to minimize its future potential taxable income.

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