Microsoft Dividend Policy and Milestones of Microsoft


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Microsoft Dividend Policy and Milestones of Microsoft.


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Microsoft Dividend Policy and Milestones of Microsoft

  1. 1. Microsoft Dividend Policy Dividend is the share of the PROFIT that a company decides to distribute to its shareholders. While the company pays tax on the distributed dividends, the shareholders can enjoy their dividends TAX-FREE.
  2. 2. 1 __________ Retained earnings ∝ cash dividends Retention Dividends Retention Dividends
  3. 3. Cash retained for expansion • Bonus/Extra Dividend • One-off(non recurring distribution) Paid in Cash Scrip Dividend (in%), but different from STOCK SPLIT(in fraction) • To relieve its B/S of HUGE cash balance $3 in 2004
  4. 4. Dividend Policy Traditional Relevance IrRelevance
  5. 5. DIVIDEND YIELD Dividend Yield= Annual Dividend Per Share/Price Per Share YIELD CURVE Types Of Yield Curve  Normal  Inverted  Flat (humped)
  6. 6. Normal Inverted Flat
  7. 7. CASE
  8. 8. • Profits are HELD with MSFT • 1st company in DOW 30 • In 2003 the company declared its FIRST ever dividend for common stock. • Returns to the shareholders in the form of CASH DIVIDENDS and SHARE REPURCHASES • In 2010, the company decided to raise a debt of $6bn in order to pay for the dividends and to repurchase shares.
  9. 9. • The financial debt could be raised from 30bp to 87.5 bp(base point) over the treasury bill for 3 to 30 years. • The company raised the debt despite of cash surplus as it did not want to repatriate the cash which had been invested outside the US as it would have to pay taxes. • MSFT showed it love for debt and for the share holder it meant a higher dividend rate and for bond holder it meant a safe option to invest. • MSFT faced the biggest challenge from the software market where they faced the duplicity and piracy of its software.
  10. 10. Current Statistics Market Price= $36.17 Dividend yield = 3.10%
  11. 11. P/E ratio= 13.40 EPS $ 0.53 @ 2012 $ 0.63 @ 2013 C:UsersSivadityaDesktopmicrosoftMSFT.htm
  12. 12. Recent Dividends NET INCOME 2012 $4466m 2013 $5244m
  13. 13. REASON OUT is the company buying back shares ? Price/Earnings Ratio (P/E)