21 July 2004 Microsoft, the world’s largest software company, announced this week that it will pay out a one-off dividend to its shareholders worth $32 billion, or $3 per share, marking the largest-ever payout in corporate history.
The software giant also plans to double the dividend it pays out annually to $3.5 billion until 2008, or $75 billion over four years.
In addition to the dividend, Microsoft said it plans to buy back up to $30 billion of the company’s stock over the next four years.
Microsoft has faced growing pressure from institutional investors to make its shares more attractive. Microsoft’s share price has been virtually stagnant since early 2000, even though its cash pile has been growing.
The company currently sits on cash holdings of $56 billion, and is generating an average monthly cash net income of $1 billion. Investors have been demanding that Microsoft use this money, or return some of it to them.
Bill Gates, chairman and biggest shareholder, will be the largest single beneficiary, receiving $3.3 billion of the $32 billion to be paid out, as well as an extra $180 million per annum from the increase in the quarterly dividends. He says he will donate it to the Bill and Melinda Gates Foundation. Steve Ballmer, the CEO of Microsoft, will receive $1.2 billion in the payout.
Microsoft has been limited in its ability to spend its cash on acquisitions, due to monopoly concerns.
The manner in which Microsoft chose to release its cash stockpile — over half in one batch — came as a surprise to many analysts.