Microsoft Wants to Give More Back

The software giant boosts its dividend.

Evan Niu
Evan Niu, CFA
Sep 19, 2012 at 8:00PM
Technology and Telecom

There's one thing investors can count on with Microsoft (NASDAQ:MSFT): It gives back to shareholders. The software giant has just declared its next quarterly dividend and is actually boosting it by 15% to $0.23 per share. That may all sound fine and dandy, but that increase actually represents smaller dividend growth than in prior years.

Microsoft paid quarterly dividends of $0.13 per share in fiscal 2010, and raised that 23% to $0.16 in fiscal 2011. The next fiscal year, Mr. Softy would bump that quarterly payout by 25% to $0.20. Of course, I wouldn't expect Microsoft to be overly generous with handouts after reporting its first quarterly loss as a public company thanks to a whopping $6.2 billion goodwill impairment related to the failed acquisition of aQuantive. In a way, that purchase itself could be considered a generous handout... to aQuantive shareholders, who enjoyed an 85% premium when Microsoft bought the company.

The new dividend puts Microsoft's yield near 2.9%, which still lags Intel's (NASDAQ:INTC) 3.9% yield, a favorite among dividend tech investors. Fellow tech blue chip IBM (NYSE:IBM) pays out just a 1.6% yield, and longtime rival Apple (NASDAQ:AAPL) just paid out its first dividend in 17 years, which comes in at around a 1.5% annualized yield.

On the other hand, Microsoft does boast a higher payout ratio than its peers, paying out nearly 40% of earnings over the past year (before the increase). Intel has just a 34% payout ratio, while IBM's looks stingy in comparison at just 22%. Technically, Apple's payout ratio is just 6%, but that's only because the iPhone maker has only paid one quarterly dividend in the past year.

Microsoft also announced that Raymond Gilmartin is stepping down from the board after serving since 2001. Gilmartin will retire and not seek re-election at the company's 2012 annual meeting. That leaves 10 remaining board members.