Microsoft Corporation: Dividend Policy

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Case Details:

Case Code : FINC071
Case Length : 19 pages
Period : 2002-2010
Pub. Date : 2011
Teaching Note : Available
Organization : Microsoft Corporation
Industry : Information and Technology
Countries : US, Global

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"This higher dividend, combined with our ongoing share repurchase program, reflects our commitment to returning capital to our shareholders and our confidence in the long-term growth of the company." 1

- Peter Klein, The Economic Times2, September 2010.

"Dividends are a much, much more transparent and real way to return cash to shareholders."3

- Thomas M. Doerflinger4, Bloomberg Businessweek5, January 2006.

On September 21, 2010, Microsoft Corporation (MSFT), the world's leading software company, increased its quarterly dividend by 23% to 16 cents from the 13 cents given the previous quarter6. The management decided to raise a debt in order to pay the cash dividends.

The company also announced a buyback of the common shares. On this occasion, Peter Klein (Klein), Chief Financial Officer of MSFT, said, "The increase of dividend was another sign, in addition to the company's share repurchase program, of Microsoft's commitment to shareholder value and confidence in its long-term growth prospects."7

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1] Dina Bass, "Microsoft Raises Dividend, may Borrow up to $6 Billion More," The Economic Times, September 21, 2010.
2] The Economic Times is a leading business daily newspaper in India.
3] Thomas M. Doerflinger, "The Dirty Little Secret about Buybacks,", January 23, 2006.
4] Thomas M. Doerflinger is an equity strategist in UBS AG. UBS AG is one of the leading organizations in the financial sector and it has offices all over the world.
5] Bloomberg Businessweek is a financial magazine which contains all types of financial news, analyses, and business reports.
6] Joan E. Solsman, "Microsoft Raises Quarterly Dividend 23% to 16 Cents,", September 21, 2010
7] Joan E. Solsman, "Microsoft Raises Quarterly Dividend 23% to 16 Cents,", September 21, 2010.

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