Today Microsoft announced that it will buy back shares as part of a plan to return up to $75 billion dollars to its shareholders. This four year plan comes with great applause from analysts who have been calling for this for a long time. Everyone's happy especially Microsoft as its stock rose 4 percent in after-hours trading.
Microsoft said Tuesday that it will boost its dividend, buy back shares and offer a $3-per-share one-time payout as part of a plan to return up to $75 billion to shareholders over the next four years.
Analysts have been calling on the company for some time to distribute a chunk of its massive cash holdings. The company initially urged patience but had promised in recent months that it would offer a plan for the cash before an analysts' meeting next week. Microsoft said it will spend about $14 billion over four years in boosting its dividend to a total of 32 cents per share a year, essentially doubling the past year's dividend of 16 cents per share. The company expects to spend $32 billion on the one-time payout and $30 billion on the stock buyback.
As of March, Microsoft had $56.4 billion in cash and short-term investments. In addition, analysts say the company generates in the range of $12 billion a year in cash, meaning that even with the buyback and dividends, the company should have plenty of cash in four years' time. A higher dividend, a stock buyback and a one-time payout had all been mentioned as possibilities, with most analysts predicting that a stock buyback was the most likely possibility. In the end, Microsoft chose to offer all three.
News source: C|Net News.com