Microsoft (MSFT) Board Approves $60B Share Repurchase Program

Microsoft Corporation's (MSFT) board has approved a $60 billion stock repurchase program, according to reports. The company also raised its quarterly dividend to 62 cents from the earlier 56 cents. The dividend will be paid out on Dec. 9 to persons who held Microsoft shares as of Nov. 18. The share repurchase program does not have a timetable and can be terminated any time, the company stated.

Microsoft has stepped up its share buyback programs in the past decade, announcing such programs every three years since 2013. For example, it initiated $40 billion share buyback programs in 2013 and 2016. The announcement of this new program comes toward the end of a similar 2019 $40 billion program. Microsoft has already spent $23 billion from that program this year and has $8.7 billion remaining.

Key Takeaways

  • Microsoft's board has approved a $60 billion share buyback program.
  • The company also announced an 11% hike in its quarterly dividend.
  • Microsoft's announcement comes on the heels on a Democrat-led effort to impose a 2% excise tax on share buybacks by corporates.

How Does Microsoft's Announcement Affect Its Shareholders?  

Microsoft's latest announcement is interesting because it comes on the heels of efforts by Democrats to levy a 2% excise tax on stock buybacks by publicly-traded companies. Stock repurchases have surged in recent years. In 2018, publicly listed companies announced that they would spend $1.1 trillion from their balance sheet on repurchasing shares. While that number declined by 30.8% during the pandemic, this year is witnessing a revival of sorts in the practice.

Microsoft competitors in the technology industry have also jumped onto the buyback bandwagon. Apple Inc. (AAPL) leads the way. As of April 30, it had spent $77 billion on stock repurchases in the past four quarters. Meanwhile, Alphabet Inc. (GOOGL) had repurchased $11.4 billion worth of shares in the March-ending quarter, and Facebook Inc. (FB) had spent $3.9 billion.  

Critics say that stock market gains and rising market capitalizations in recent years are a function of stock buybacks. Company buybacks have resulted in artificial scarcity of stock and boosted their earnings per share (EPS) and valuations.

Share buyback programs have helped play a role in elevating Microsoft's stock price, hoisting it above competitors to become the second most valuable publicly traded company in the world after Apple. For example, Microsoft's stock price has more than doubled, from $130.90 to $301.76 as of this writing, from September 2019, since it announced the last such program.

To be sure, the popularity of Microsoft's product portfolio during the pandemic coupled with rapid advances in its cloud unit have also boosted its revenues. The company has also returned an increasing amount of capital to shareholders. For example, its dividend per share jumped from $0.36 in the first quarter of 2016 to $0.56 in the last quarter. The annual amount spent on total dividends and share buybacks jumped by $5.5 billion and $10 billion, respectively, during the same time period.

Microsoft's stock repurchase programs had reduced its overall share count by 1% in public markets by the end of April.

Article Sources

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  2. Wall Street Journal. Microsoft to buy back $40 billion in stock buyback. Accessed Sep. 16, 2021.

  3. Forbes. Democrats propose 2% excise tax on stock buybacks. Accessed Sep. 16, 2021.

  4. CNBC. Stock buybacks hit a record $1.1 trillion. Accessed Sep. 16, 2021.

  5. Reuters. US corporate buybacks are on the rise, lifting investor hopes. Accessed Sep. 16, 2021.

  6. Barrons. Tech giants have ramped up stock buybacks. Accessed Sep. 16, 2021.

  7. Business Insider. The backbone of the stock market over the last 10 years is beginning to fade. Accessed Sep. 16, 2021.

  8. Investor Place. Microsoft stock benefits from large buybacks. Accessed Sep. 16, 2021.

  9. Microsoft. Total cash returned to shareholders. Accessed Sep. 16, 2021.

  10. Barrons. Tech giants have ramped up stock buybacks. Accessed Sep. 16, 2021.

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