Microsoft announces stock buyback, dividend boost

Microsoft announced a stock buyback and a dividend program this week.

Microsoft announced a stock buyback and a dividend program this week.

Following the shake-up created by the announced ouster of Stephen Ballmer, Microsoft's embattled chief executive officer, and the purchase of mobile phone maker Nokia, the technology giant is now moving to solidify its financial position with a stock buyback program. It simultaneously announced a dividend increasing, which could be aimed at improving the relationship with beleaguered investors tired of seeing the company stumble between product launches and innovative misfires.

According to Business Insider, the buyback will amount to approximately $40 billion. As a result, the price rose 1.67 percent almost immediately after the pledge, which the source reported is replacing a previous program that was scheduled to end September 30. 

As for the dividend, Microsoft is boosting it 22 percent to $0.28 per share, up from $0.23 last quarter. Media speculation suggests that, as Microsoft shifts to become more consumer-friendly, the company needed to energize its stock price. The business is gambling big this holiday season with the launch of the Xbox One, which Microsoft is billing as the better alternative to chief rival Sony's PlayStation 4.

Will the tactic work? It remains to be seen. The upward movement in stock price could be a reflection of positioning on the behalf of investors, who are desperate to find income-generating assets in a low-growth, low-interest environment. There is also lingering optimism from both the Ballmer and Nokia announcements, so Microsoft could be trying to show that it continues to make the changes necessary for long-term success. Only time will tell if these efforts will bear fruit.

In the meantime, investors should consider [MSFT] as a possible option, especially with the modest dividend increase. As the SmartStops Risk Signals Analysis shows, the stock is still at risk, given the company's history of poor product and service launches and inability to compete in a crowded field. With the new iPhone 5 varieties, as well as new Samsung phones, hitting the market this winter, as well as the PlayStation 4, it's anyone's guess as to how consumers will receive the reinvigorated Microsoft.

Rely on our portfolio management tools to help you reach an informed decision about your investments. SmartStops have saved Microsoft investors over $2 per share, so don't wait – contact us to learn more today!

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