Microsoft Corp announced a new US$40 billion share buyback on Tuesday as part of an effort to return more cash to stockholders.
The tech giant, which has seen its stock stagnate in recent years, also said it was increasing its dividend by 22 percent, to US$0.28 a share.
The new share buyback comes on the heels of another share repurchase plan announced in 2008, which is set to expire on Sept. 30.
“These actions reflect a continued commitment to returning cash to our shareholders,” Microsoft chief financial officer Amy Hood said in a statement.
The move comes with Microsoft in transition, having announced the departure of chief executive Steve Ballmer within a year.
Microsoft, which is trying to refocus the company around “devices and services” after missing the transition to mobile computing, also recently announced it was buying the mobile phone division of Nokia Oyj.
The maker of Windows software had been the undisputed leader of the tech sector for years, but it has recently been overtaken in market value by Apple Inc and Google Inc.
Microsoft shares rose 0.59 percent to close at US$32.93 on Tuesday. A buyback generally boosts the value of a stock by reducing the number of outstanding shares.
Morgan Stanley analyst Keith Weiss said the news was a “modest” positive for Microsoft, but added that investors may be cautious because of the “struggling devices strategy.”
Citi analyst Walter Pritchard argued in a research note that “there is much more room for Microsoft to return more capital through dividend.”
Microsoft has more than US$70 billion in cash holdings, much of which is held overseas. Like Apple and some other tech firms, Microsoft has held off repatriating the cash, which could be subject to the top corporate tax rate of 35 percent.
Microsoft is holding its analyst day this week, where it will discuss the strategy and rationale behind the Nokia acquisition.
“Investors remain unconvinced of the logic behind the Nokia deal, thus management should clearly articulate why a smartphone presence is critical to the long-term success of Office and Windows,” Barclays analyst Raimo Lenschow said in a note to clients.
“Additionally, with many long-only investors unsure about how the new strategy will affect Microsoft’s financial model, we expect goalposts to be provided to help investors understand how the transition will play out.”
Lenschow said the buyback plan was in line with expectations, but that the time frame for the program was not clear.