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Microsoft Announces Dividend and Stock Buyback Program
neile writes "Microsoft just announced some of their plans for their large cash reserves. This includes moving to quarterly dividend payments of $0.08 a share (up from $0.16 annually), and a special one-time dividend of $3.00 a share in December. The Board of Directors also approved a four-year, $30 billion, stock buyback plan."
These are the actions of a company that realizes they are no longer a growth stock and is no longer looking to finance things via the market but rather reward consistent investors and enter into a "slow, continuous growth" mode instead of acting like a start-up. Investors will like quarterly dividends and the buyback will shore up the flagging stock price.
Now, if only Cisco would buyback their stock (way too many shares floating), start expensing their options like a proper company and start paying some dividends, maybe they could be considered a grown-up stock as well.
Microsoft is great at one thing; making money. Unfortunately, being good at making money doesn't necessarily mean they have to be good at making software (at least considering how they've gone about it).
The defining purpose of a public corporation isn't to maximize profit by any means necessary. We live in a society of laws and regulation. So no, not all corporations necessarily engage in unethitcal activity in pursuit of profit.
There is no feedback loop. They buy back your shares, you no longer own them, so yes MSFT owns another 0.0001% of itself.
Yes, a company could theoretically own itself. Much like a million and one Mom-and-Pop corner stores own themselves.
The sharemarket exists as a way to distribute risk. A long time ago (in a galaxy fa...) MSFT said: "Hey we have this great idea to make software to sell to computer users, and we need money to do it. Rather than take out a bank loan, how about you guys (Mr and Mrs Mutual Fund Owner) shoulder some of the risk? If it works out, we'll both make lots of money!"
If MSFT happens to make so much money that they can afford to buy the risk back from Mr and Mrs Shareholder, then more power to them. This is not the way it happens in reality though, because the risk always exists, and if MSFT happens to go down the toilet, they don't want to shoulder the entire burden. Better that Mom & Pop Shareholder take some of the pain too.
Strange isn't it that most Fund Managers and Brokers never ever mention the 'Risk' part of the equation eh? They always talk about 'equity' and 'investment'.
I'll say it again: the sharemarket is simply a way of distributing business risk. If you can't take the risk, invest in fixed income. Not as sexy and not as much possible upside, but not as much risk.
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Because the defining purpose of any public corporation is to maximize profit for the shareholders, then by definition all public corporations behave unethically.
It's actually to maximize value rather than profit.
A company can sell all of its assets and fire all its employees and they'll show great profits for that quarter. Unfortunatley they did not maintain the value of the company.
Acting unethically has an impact on the value of a company, but only as much as the society and pool of potential investors estimate that value. A company can only act as unethically as the society will allow.
seriously how many /.actually have MS stock.
There is a very good chance that anyone with mutual fund investments in growth funds that deal in mid-to-large-cap stocks will own a bit of Microsoft. Since I'm guessing there are quite a few people who are gainfully employed reading Slashdot that are probably younger, probably have a 401k, and probably are choosing longer-term investment options to grow their money, I would bet a significant percentage of (the gainfully employed) Slashdotters own a chunk of Microsoft, whether they realize it or not.
I can't give you exact figures, but I know that I indirectly own a little chunk of Microsoft and I'm guessing a lot of other people here do too.
Free yourself. Everything else will follow.
If, however, you're not sure whether President Bush will continue to tax long-term capital gains and qualified dividends at 15%, or President Kerry will demand that Congress undo the tax cuts, resulting in marginal tax rates on long-term capital gains of 20%, and all dividents at up to 39%, blowing some of those reserves on one-time dividends and buybacks over the next 12 months is a pretty good idea.
Google for "special dividends", and you'll see that a lot of companies are doing this sort of thing (one-time "special" dividends of 5-10%, rather than merely raising their dividend by a few cents per share indefinitely) these days. You'll also notice that the trend started in the past six months -- right about the time people realized that the election is shaping up to be a statistical dead heat.
Pre-announcing a major ($3) dividend to be paid many months from now seems kind of funky. This will be immediately priced into the share value, of course -- every share is immediately worth that much more since everyone knows the distribution is coming. It's analogous to the "ex dividend" period of that occurs when a distribution is pending, except that the amount is huge and it's much longer in the future (almost half a year!). On top of that, a major buyback plan means that there will be sustained buying pressure on the stock.
So call me cynical, but this is the first thought that came into my head: These events will cause all of the executives to hit the strike price on their stock options.
If MSFT buys back shares, then some people who once had shares have cash instead and the remaining people own a bigger fraction of the company. It's like some of the owners of a partnership allowing another partner to cash out, paying her off from the assets of the business.
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