Microsoft Corporation is embarking on a $40 billion stock buyback program and jack up its quarterly dividend to 12 percent. This is the third time the tech behemoth has given the green light for a share repurchase of this magnitude.
Microsoft Inc's (NASDAQ: MSFT) executives and board of directors last approved share buyback was in 2013. The company authorized another billion-dollar repurchase three years later.
The software firm's stock prices on Wall Street shot up 1.5 percent to $140.36 during extended sessions moments after the announcement was made on Wednesday.
Microsoft, which disclosed that it would conduct its yearly stockholder's assembly on December 4, also divulged a quarterly dividend of 51 cents a share, almost 12 percent bigger compared to the previous period.
The dividend will be dispersed on December 12, this year, to shareholders of record November 21, while ex-dividend date will be payable on November 20, 2019. The buyback program has no expiry date and is subject for termination at a moment's notice.
The annual shareholders meeting will be held via teleconference and presided by Microsoft Inc chief executive officer Satya Nadella; president and chief legal officer Brad Smith; chief finance officer Amy Hood; and independent board chair John Thompson.
A live webcast meeting gives an immersive real-time experience to stakeholders wherever they are located. It also provides an opportunity for broader multilingual access to a discussion with board members and top-level executives.
Investors may not be aware that one of the main reasons for Microsoft's success is its large share repurchase system. As of June 30, the company unloaded more than $19 billion on buybacks alone. This is a gain of 83 percent compared to the previous four quarters.
The Redmond, Washington-based firm generated a huge $38.4 billion in free cash flow (FCF) in the period as the company spent more than $33 billion on stock buybacks and dividends from this FCF, which includes money allotted for costs and investments.
The FCF also includes almost $17 billion spent on research and development, over $18 billion for marketing, all of Microsoft's operating expenditures. The FCF also covers almost $14 billion allocated on capital expenditures, among others.
Share buybacks help a tech empire like Microsoft to continue rising. The company, which currently has $11.7 billion left in its share repurchase program, is constantly keeping a keen eye on the markets for more buying sprees. Stocks repurchased also allow earnings per share to grow and protect share advances from options and limited stocks issued to personnel.
