Microsoft Approves $40 Billion Stock Buyback; Increases Dividend

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The Board of Directors of Microsoft Corporation (NASDAQ: MSFT) approved another $40 billion stock buyback program and increased its quarterly dividend by 8% to $0.39 per share.

According to the tech giant, it is on track to complete is existing $40 billion shares repurchase program by the end of this year. Its new shares repurchase program has no expiration date, and the Board may terminate it anytime.

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Microsoft is committed to returning capital to shareholders while it cash pile increases. The tech giant had $113.2 billion in cash and short-term investments as of June 30, 2016. It has been using its capital for shareholder returns because of the challenges in bringing back its massive cash (subject to taxes) to the United States from overseas.

Microsoft is committed to returning capital to investors

Sid Parakh, a fund manager at Becker Capital Management, which owns shares of Microsoft, told Bloomberg,

“This reflects a continuation of the company’s pledge of returning value to shareholders via dividends and buybacks. This implies continued confidence in current and future business trends.”

He noted that Microsoft has a “debatable history with acquisitions,” through its capital return program; the tech giant showed to investors that it has discipline when it comes to spending money.

The company recently agreed to acquire Linkedln Corp. (NYSE: LNKD) for $26.2 billion, which is considered one of the largest in the history of the tech industry. Its CEO Satya Nadella, who has been implementing strategies to boost the company’s revenue. He believed that the deal offers a tremendous opportunity for both companies.

MSFT stock surges

Nadella took over as CEO in 2014. Since then, Microsoft’s cloud and Internet-based Office software businesses are growing and increased the optimism of investors regarding the company’s future.

The stock price of Microsoft gained around 1% during the extended trading after the company announced its new stock buyback program and dividend increase. MSFT stock gained more than 32% in value over the past year.

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