Microsoft has decided to use the war chest it did not get to use to purchase Yahoo to sweeten up the shareholders with a share buyback and an increased dividend:
Microsoft Corp. today announced that its board of directors approved a new share repurchase program authorizing up to an additional $40 billion in share repurchases with an expiration of September 30, 2013.
The board of directors also declared a quarterly dividend of $0.13 per share, reflecting a two cent or 18 percent increase over the previous quarter’s dividend. The dividend is payable December 11, 2008 to shareholders of record on November 20, 2008. The ex-dividend date will be November 18, 2008.
In addition, the company stated that it has completed its previous $40 billion stock repurchase program. Microsoft has returned over $115 billion to shareholders through a combination of share repurchases and dividends over the last five years.
A share buyback is useful tool for mature, cash rich companies like Microsoft to reward shareholders, particularly in times of depressed stock prices, plus it directly increases earnings per share. The share price was up 5% after the announcement.
Microsoft also announced that its board of directors has authorized debt financings of up to $6 billion and has established a $2 billion commercial paper program. Not unexpectedly,"the commercial paper is rated A-1+ by Standard & Poor’s and P-1 by Moody’s, the highest ratings available from both agencies."