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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

September 21, 2011 at 6:59 AM

Boost in quarterly dividend doesn’t seem to affect Microsoft stock

Microsoft’s share price today doesn’t seem to have been affected by Tuesday’s announcement that the company would be boosting its quarterly dividend by 25 percent.

Microsoft said Tuesday that it was increasing its quarterly dividend to 20 cents per share, up from 16 cents.

The company’s shares this morning were trading at about $26.85, down 13 cents. Microsoft shares had ended Tuesday at $26.98. The quarterly dividend announcement came after the stock market closed and in after-hours trading, shares rose to $27.15.

Financial analysts had been expecting the company to announce the dividend increase, especially given Microsoft’s large cash- and short-term investments balance of nearly $53 billion. Though some analysts even called on the company to double the dividend, the 4-cent-per-share increase was generally in line with what many analysts expected.

“It’s a decent dividend increase,” said Sid Parakh, senior vice president of equity research at Seattle brokerage firm McAdams Wright Ragen.

Investment bank Goldman Sachs’ report on the announcement said: “With the dividend increase in line with current expectations in our view, we would not expect the news to meaningfully impact the company’s shares (Wednesday).”

The report added: “The board did not authorize a new share repurchase program with roughly $12.2 billion remaining as of the end of the June 2011 quarter. That said, it appears the company should have capacity with its current plan as it bought back $11.6 billion in shares in FY2011. We note that if Microsoft were to be more aggressive with its buyback program in FY2012 versus last year, we believe an authorization increase could easily be done at one of its quarterly board meetings. We are currently modeling $8.0 billion in buybacks for FY2012.”

Microsoft’s stock has been largely flat over the past several years while the stock of competitors such as Apple and Google have soared.

According to Forbes, Microsoft’s past dividend increases haven’t done much for the company’s stock, according to FBR Capital Markets analyst David Hilal. He found the stock’s gains on the day following the five previous announced dividend increases have never exceeded 2 percent. In 2005 and 2010, the stock dipped in the first of day of trading after Microsoft announced a dividend increase.

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