Microsoft plan $40bn share buyback

Microsoft raises dividends and announces plans to embark upon large buyback

Microsoft (NASDAQ:MSFT) announced plans to buyback up to $40 billion in stock on Tuesday, as well as raise its dividend by 8 percent as part of the new share repurchase program.

Founded by Bill Gates in 1975, Microsoft has become one of the biggest sources of income amongst US stocks. Last year alone the company distributed over $23 billion to its investors, despite not paying any dividends to shareholders until 2003.

The repurchase target representing about 9 percent of Microsoft’s total market value, was the same amount as the target announced back in 2013. Microsoft plans to complete the buyback by the end of this year.

These share buybacks have often been a popular choice for investors and tend to push up a company’s share price. This has been recognised by Microsoft for a number of years, having spent almost $140 billion on the tactic over recent years.

Although the decline in PC unit sales led to a large fall in sales for Microsoft, the company has concentrated on selling alternative software and services. This has helped generate a steady income for the computing company. Hope for Microsoft has also grown in recent years when in 2014 chief executive, Satya Nadella, announced plans to build a big business in ‘cloud’ services.

Pursuant to this strategy, Microsoft announced the purchase of LinkedIn, the professional networking site, earlier this year. The purchase of LinkedIn aims to provide a range of professional services to its clients, including a social network, to connect them to each other. It was the company’s largest acquisition to date at $26 billion in cash, considered a vast sum for a network currently reporting an annual loss of $166 million.

Microsoft have made it clear that the buyback may be terminated at any time and there is no expiration date. The company’s shares have increased by 31% over the past year and stood at $57.41, up one percent, on Tuesday.