Microsoft announces new $40-bn stock buyback, raises dividend

Just before the markets opened yesterday Microsoft announced a new $40-billion stock buyback as part of the its plan to return more cash to stockholders.

The Redmond, Washington-based company also said that it was increasing its dividend by 22 per cent, to 28 cents a share.

The new share repurchase program, which has no expiration date, replaces the previous $40-billion share repurchase program that was set to expire on 30 September 2013.

''These actions reflect a continued commitment to returning cash to our shareholders,'' said Amy Hood, chief financial officer of Microsoft.

Like Apple Inc, Microsoft has most of its more than $70 billion in cash holdings overseas and is hesitant to repatriate the cash since it would attract corporate tax rate of 35 per cent.

In April, bowing to investors' pressure, Apple announced the biggest share buyback in corporate history. The California-based iPhone maker had announced that it would increase its buyback program to $60 billion from the $10 billion it had earlier committed, while Yahoo is also buying back shares worth $5 billion.  

Share buybacks are welcomed by existing investors as it boosts the value of their stocks since there are fewer shares in the market.

For Microsoft, this is the third big announcement it has made since the past one month, after Steve Ballmer announced in late August that he would step down as the company CEO within 12 months, and early this month offered to buy the mobile phone handset manufacturing business of Nokia Corp for $7.1 billion.