Microsoft's Dividend: A Sign of Maturity

Though it's small by Colossus of Redmond standards, the cash payout says a lot about how Gates & Co. sees itself these days

At Microsoft's annual meetings each November, one shareholder question is as predictable as the fall that rains in Redmond: When will the software giant issue a dividend? Even as Microsoft's cash holdings ballooned to $40 billion, Chairman William H. Gates and CEO Steven A. Ballmer could always be counted on to recite the standard company line: The board routinely considers the matter but wants to keep the cash for contingencies. Yet on Jan. 16, the board changed its mind. Microsoft (MSFT ) will split its stock on Jan. 27 and pay an 8-cent per share annual dividend on Mar. 7 to shareholders of record as of Feb. 21.

Even with the recent Bush Administration proposal to eliminate taxes on dividends, the about-face is startling. Gates and Ballmer are as paranoid about threats to their business as they come, and they've always rationalized the cash hoard, which now tops $43 billion, as a cushion against rivals. It gives Microsoft the ability to make multibillion investments and acquisitions without batting an eye.

View: Full Story