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Microsoft Considers $10 Billion Dividend
Dreadnougat writes "Microsoft is considering paying out a $10 billion dividend, the largest corporate payout ever. Cynics (ok, anyone reading /.) might note that Bill Gates stands to make $1.18 billion himself off the $1 a share dividend, in comparison to the $95 million he makes in a normal year off the regular 8 cents a share dividend."
...it's a dollar a share. It's a lot of money for Gates because he owns billions of Microsoft shares. But for your average Microsoft stockholder it's only a fraction of a fraction as much. Nobody's "buying off" anyone. Dividends happen not infrequently, and as it happens Microsoft had a lot of excess cash to divide.
"All it takes to fly is to hurl yourself at the ground... and miss." - Douglas Adams
Actually, it's probably both.
When MS stock was ascending in value, it was worth Gates' while to not pay a dividend, because he'd have to pay taxes on on any dividend he earned from it. He didn't have to pay taxes on the stock as long as he didn't sell it.
Now that the price is stable, if not dropping, he's better of paying the dividend, because even though he has to pay taxes on it, he gets money out of MS before his stock loses any more value.
No, dividends are taxed at the (now reduced) capital gains rate, instead of the ordinary income rate.
There's exactly two legitimate bases for stock valuations: one is dividends, the other is a cycle of systematic buy-backs and new issues.
Absent either of those two options, what have you got? You've got someone saying to the market "Hey, loan us some money. We never intend to repay, but perhaps you can sell our note to someone else for a profit."
The tax on dividends has not been eliminated. It has been reduced to a maximum of 15%. Previously dividends were taxed as ordinary income (max rate 38.6%).
Bill Gates is not evil, but Bill Gates is certainly not the poster child for meritocracy either. Bill's dad was a top-notch lawyer in New York. This gave him a top-notch education to begin with and an easy access to capital. Please, don't make it sound like everyone could have done what he did.
The divided taxation rate was reduced to 15% and is set to be eliminated. The sunset provisions kick in in 2008 where it can be optionally extended.
No...You couldn't, because everybody knows that the dividend is coming, and when they can sell the stock after their dividend is theirs.
If you were the only person who knew, and could sell the 'dividendless' stock to an unsuspecting dupe, you could, but the legal system and an efficient market prevent this.
Although there an 'ownership as of' date that is prior to the 'payable' date, no brokerage will trade in dividend-stripped stock on the open market. They'd quickly be sued and legally barred from doing business because of fraud, and all this to earn the $9.95 commission you're paying them? I don't think so.
Laugh while you can, monkey-boy!
The guy (Ed Roberts) that gave Gates a venue for a successful product (MITS BASIC on the Altair) had this to say:
The computer revolution:
"You'll read that Bill Gates envisioned it all, which is a crock. He didn't envision any of it. Nobody did."
On working with Paul Allen and Bill Gates:
Allen was easy to work with, while Gates was not. If he didn't get his way, "he acted like a spoiled kid, which is what he was."
( from http://webpages.charter.net/dperr/mits.htm )
try { do() || do_not(); } catch (JediException err) { yoda(err); }
Over 600 million each donated to child health, and HIV/AIDS/TB. As staggering as the absolute magnitude of those numbers are, even in percentage terms they are quite remarkable. Given his total career earnings of, say, $50 billion or so (to date), this represents more than 1% to each of those causes.
To put it in perspective, do you know any other moderately well off computer geek, who may make $3 million in their career, pledging 1% ($30,000) to each of those causes? He's also indicated that global HIV/AIDS/health is a top priority, so expect him to give a lot more in that area before he's done.
Slashdot is entertaining like pro wrestling is entertaining
I donate 2% of my salary to charities; my boss convinced me it was the right thing to do (he has been doing it for years). I may not make millions of dollars per year but does that matter?
Didn't GWB eliminate taxes on dividends? That'd be pure cash for the Gatester, right?
No. GWB eliminated DOUBLE taxation on dividends. The company already paid taxes on that money.
Derek
You clearly are not a Microsoft employee, nor do you know too many Microsoft employees.
Yes, the long term employees are filthy rich and never have to work another day in their lives. Pumping up the value of the stock doesn't change that fact in any way, shape, or form (if anything, it makes them even MORE filthy rich once they decide to retire and sell all their stock, which makes them more likely to retire in the first place).
Those who are not filthy rich are very happy to work there, because it is a great work environment, and the pay is damn good. Trust me, I know. Say what you will about their software - they treat their employees like gold.
How do you explain this then:
- They consistently rank amongst the top 100 employers listings in most countries they are in(number one in the UK at the moment)
- Their staff turnover is about half the industry average
- When the stock price started slowing, they increased the salary of all employees
How parent got to 5 is beyond me...
Read reviews of shopping cart software
Where'd that "$1 per share" stuff come from? All the reports I've seen today speculate about an increase from 8 to 26 cents per share, max.
According to yahoo finance, MSFT is currently trading at 26.48 and has a market capital of 284.2 billion. So you divide the market cap by the trading price to get the number of shares.
That's 10.7 billion shares. $10 billion distributed into 10.7 billion shares is roughly $1 per share.
Gates had roughly 600 million shares before the split, so now he's got 1.2 billion shares or so. So he'll get around $1.2 billion from this.
Stock price is justified by the profit potential of a share. For instance, if you expect a share to yield 6 cents of profit per year, and current interest rates is 3%, you'd be ready to spend $2 for that share (3% of $2 is 6 cents). (This simplistic calculation needs of course need to be adjusted for risk: you expect your shares to pay higher interest rates than your savings account, because they carry higher risk ==> so you'd probably put a price less than $2 on the share..)
For a non-growing share, all profit you can expect from a share is dividend. Thus higher dividend means better share price.
For a growth stock, profit is not only the dividend, but also the price increase of the share itself. In a way, the share price feeds itself... until the bubble bursts. That's why until recently, MS didn't pay any dividend at all: its exponential growth was justification enough for its "value". However, since 1999, MSFT's share price has been more or less flat (or even, falling), thus growth can no longer justify what little value remains. MSFT has to pay a dividend to stop the downfall.
Of course, smart economists may realize why MSFT is paying these huge dividends (because the stock would suck otherwise), and the move might have just the opposite effect...
Bill Parish has an interesting writeup about this. The report is quite old (November 1999), so many of those things that have already come to pass are still predictions...
A more up to date press list can be found here (not all references articles are about MSFT, but most are...)
The stockmarket - when you take out dividends - is really nothing more than a large scale baseball card trading scene. The higher the popularity a stock has and the lower the supply, the higher the price. As the company which the stock represents performs poorly, the stock price goes down. Why? Does owning the stock of a poorly performing company have any bearing on the stock? No...just a poorly performing player has no bearing on the intrinsic value of a baseball card.
The real purpose of stocks are completely lost on the normal guy. Those with large perecentages of stock, though, are actually able to act as the company owner which they are. The dividends are a small percentage of the stock price and really play no large role in determining what a stock is worth, other than a few percentage points.
The scary part is that, even if you realize that the entire thing is a sham, you have to keep the wool covered over your eyes because the entire world know it. Imagine you are trapped in the Matrix, you realize it, but you can't get and you can't do any cool bullettime moves...
that this is caused by President Bush's tax cut for the common man on Dividend Taxes? You think this would have happened without that gift from the President? This has nothing to do with stock price, it has to do with tax rate. It is now cheapest for Bill Gates (and let's not forget all the other Microsoft Billionaires) to receive their pay in dividends. So remember when your kids no longer have band practice in school, and you have no healthcare that it was simply that we needed to provide tax relief for the common man, like Ballmer and Gates.
Only he's able to do that. In one episode, as I recall, when the nephews tried to swim with him, they just smacked right into it. And for the record, my money bin WOULD be on top of a hill with a gigantic dollar sign on it. And it would have all of his traps, too. Except it would have more SSMs to keep the Beagle Boys and other such burglers out. ...yeah, okay, so my childhood was largely constructed of Disney Afternoon...
Danish != nationality