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    Afm Project

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    Anshul Mishra
    Microsoft had not paid dividends for 28 years, instead reinvesting profits. In 2003, it declared its first dividend for common stock and continued paying dividends through share repurchases and cash dividends. To fund a special $3.40 per share dividend in 2004 and share buybacks, Microsoft took on $6 billion in debt despite having cash surplus. This was likely to avoid taxes from repatriating offshore cash. Both cash dividends and share repurchases can positively impact share prices by increasing shareholder value and loyalty.

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    Afm Project

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    Anshul Mishra
    73 views11 pages
    Microsoft had not paid dividends for 28 years, instead reinvesting profits. In 2003, it declared its first dividend for common stock and continued paying dividends through share repurchases and cash dividends. To fund a special $3.40 per share dividend in 2004 and share buybacks, Microsoft took on $6 billion in debt despite having cash surplus. This was likely to avoid taxes from repatriating offshore cash. Both cash dividends and share repurchases can positively impact share prices by increasing shareholder value and loyalty.

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    Microsoft had not paid dividends for 28 years, instead reinvesting profits. In 2003, it declared its first dividend for common stock and continued paying dividends through share repurchases and cash dividends. To fund a special $3.40 per share dividend in 2004 and share buybacks, Microsoft took on $6 billion in debt despite having cash surplus. This was likely to avoid taxes from repatriating offshore cash. Both cash dividends and share repurchases can positively impact share prices by increasing shareholder value and loyalty.

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    Download as pptx, pdf, or txt
    73 views11 pages

    Afm Project

    Uploaded by

    Anshul Mishra
    Microsoft had not paid dividends for 28 years, instead reinvesting profits. In 2003, it declared its first dividend for common stock and continued paying dividends through share repurchases and cash dividends. To fund a special $3.40 per share dividend in 2004 and share buybacks, Microsoft took on $6 billion in debt despite having cash surplus. This was likely to avoid taxes from repatriating offshore cash. Both cash dividends and share repurchases can positively impact share prices by increasing shareholder value and loyalty.

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    Microsoft : Dividend Policy

    Present By:
    Presented to : Anant Nanda 17BSP0326
    Prof. Ranjani Matta Akshay Bhalla 17BSP248
    Akshita Garg17BSP0269
    Anshul Mishra 17BSP0411
    Ankit Sansanwal 17BSP375
    Ashish Yadav 17BSP528
    Case Introduction
     This case is all about Dividend Policy used by Microsoft
    corporation.
     Microsoft has not paid divined for 28 years. It believes in ploughing
    back money into its research and development.
     In year 2003 the company declared its first ever dividend for
    common stock.
     Microsoft continued its return to the shareholders both
    in the form of cash dividends and share repurchases.
     The management of the company decided to raise a debt of $6
    billion in order to pay for the dividend and the share buyback.
    Dividend Policy
    There are four different ways to give dividend to its shareholders….
    a) Cash dividend
    b) Bonus share
    c) Share split
    d) Shares buyback
    Between year 2003 to 2010 the company paid dividends to its shareholders in the form of
    cash dividend and buyback of shares.
    Special Dividend : This dividend is Non recurring in Nature & in December 2004 MSFT distributed
    huge cash dividend i.e. $ 3.40 per equity share to its shareholders as special dividend…

    No Dividend : After 28 years of operations first time in 2003 MSFT paid dividend , before this MSFT
    used is PAT only in new investment & project developments.
    Cash dividend
    They provide the cash to their shareholders from
    their…..
    a) Reserve and surplus
    b) Other accounting sources(debt).
    Here is some detail about cash dividend of
    Microsoft……
    Types of repurchases
    1) Open market operation: Company can buyback its share
    through authorised broker in open market.
    2) Tender offer: In this company will specify the purchase price,
    total amount and period within which shares will be bought
    back.
    3) Dutch auction: In this Auctioneer begins with a high asking
    price which is lowered until some participant is willing the
    auctioneers price is reached. The winning participant pays the
    last announce price.
    4) Targeted price: A target company attempts to stop a
    hostile takeover by buying back its own stock and
    shares, often pays a premium above the market price.
    5) Greenmail: A premium paid to a rider to get him/her to
    terminate a takeover attempt.
    Advantages of Dividends
    1) Return to surplus cash to shareholders.
    2) Tax savings by companies.
    3) Enhancing shareholders value.
    Reason for taking debt in spite of having surplus cash

    1) To provide dividend to its shareholders Microsoft went for debt


    because they did not want to return the cash which has been
    invested outside the US as it would have to pay the tax.
    2) The Federal Reserve move to soften the interest rate made
    it attractive for the companies with highest rating to raise
    the debt at cheapest rate.
    CONCLUSION…..
    Conclusion 01 : Share repurchases have Positive effect on share prices;

    The company announced major share buybacks as a part of its overall finance strategy
    of increasing shareholder value. On September 22, 2008, it announced $40 billion worth of
    stock repurchases. The market took the buyback positively and the MSFT share price pushed to
    $26.50 per share in premarket trading, up 5.33%

    Conclusion 02: Cash Dividend Positive effect on share prices;

    A major advantage of paying dividends is that they can help provide shareholder
    loyalty. When companies display consistent dividend histories, they become more attractive
    to investors. As more investors buy in to take advantage of this benefit of stock ownership, the
    stock price naturally increases, thereby reinforcing the belief that the stock is strong.

    ‘In each method of (share repurchase & cash dividend) of dividend


    distribution share price will increase’ .

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