Just two months after dousing investors' hopes to soon pay another dividend, Microsoft Corp reversed itself Friday, saying it will dip into its massive cash hoard and double its previous payout to shareholders.
Microsoft's fiscal 2004 dividend of US$0.16 a share is still modest compared with other large companies. The 0.6 percent yield -- the amount of money per share paid to investors divided by the stock price -- ranks among the bottom of Microsoft's 29 peers in the Dow Jones Industrial Average. Only Intel Corp's 0.3 percent yield was lower. Altria Group, parent of cigarette maker Philip Morris and Kraft Foods, heads the group with a 6.7 percent yield.
Still, the cash will be welcomed by shareholders who have been frustrated by the company's slowing stock price and eager to share in Microsoft's US$49 billion-plus stash, analysts said.
The dividend, the company's second this calendar year, is payable on Nov. 7 to shareholders of record at the close of business Oct. 17. The total payout is about US$1.7 billion with the single biggest beneficiary -- Microsoft chairman Bill Gates -- due to receive about US$186 million.
Microsoft for the first time yielded to shareholders' calls for a payout in March when it issued a dividend of US$0.08 a share. That didn't quiet investors' calls for a larger payout, however, as Microsoft continued to pull in billions in profit each quarter and its cash piled up.
Even doubling the dividend to US$0.16 a share doesn't dent Microsoft's cash position, analysts said.
"They can afford a lot more," said Brad Reback executive director CIBC World Markets. "They have way too much cash."
The announcement is a turnaround from just two months ago when Microsoft insisted its legal issues -- which include an inquiry by the EU and a private antitrust lawsuit from Sun Microsystems -- clouded its outlook too much to let the company make significant changes to how it treated its cash.
"We've got to be very clear that we think there are some risks associated with some things that exist on the legal front and what they might imply and what they might bring, and I simply think it would be imprudent for us to make some kind of ... significant change to the strategy on our cash until we resolve those matters," Microsoft chief executive Steve Ballmer said in July to a meeting of financial analysts.
"If it takes another `n' months to resolve these issues, what we're trying to tell you is it would be imprudent to change something in our cash strategy now," he said.
Microsoft spokesman Kent Hollenbeck declined to comment on the reasons the board of directors decided to issue the dividend, beyond saying that it is "part of the normal course of business" for the board to review the matter. He said Microsoft executives would not be available for comment.
Shares of Microsoft rose US$0.50 Friday to close at US$28.34 a share on the NASDAQ Stock Market. Over the past 52 weeks, the stock has ranged from a high of US$29.48 to a low of US$21.56, adjusted for a stock split in January.
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