Did Microsoft’s Dividend Hike Impress Investors?

Microsoft raises dividend

Tech giant Microsoft (MSFT) has been returning cash to its investors and boosting its dividend payments for the last 14 years. Most recently, the company announced a rise in its quarterly dividend. The company’s board will now pay a dividend of $0.46 per share, an increase of 9.5% from the previous dividend of $0.42 per share.

The 9.5% hike in the company’s dividend was better than last year’s hike of 7.7%. A report by Morgan Stanley (MS) had stated earlier that Microsoft investors could expect an improved dividend payout in September.

Did Microsoft’s Dividend Hike Impress Investors?

Dividend yield

Though Microsoft has announced an improved dividend payout as predicted by Morgan Stanley, the company did not meet the expectation that it would provide a dividend yield of more than 2%.

MSFT’s current annualized dividend of $1.84 per share represents a dividend payout of 43.3% and a yield of 1.63% as of September 18. In comparison, Microsoft’s peers IBM (IBM), Oracle (ORCL), and Symantec (SYMC) have dividend yields of 4.23%, 1.55%, and 1.45%, respectively, as of September 18.

Share buybacks

Microsoft also rewards its shareholders via its share repurchase program, which is supported by its strong free cash flow trend and its revenue growth. However, its share repurchase growth has been slowing recently. In fiscal 2018, Microsoft’s share buybacks stood at $10.7 billion compared to $11.8 billion in fiscal 2017.

The company’s acquisition of GitHub in June was to blame for the slowdown in its share repurchase activities. At the end of June, Microsoft had remaining shares worth $28.0 billion for repurchase under its $40.0 billion buyback program.