Microsoft Corporation: Dividend Policy

  
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Case Details:

Price:
Case Code : FINC071 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

About Dividend and Share Repurchase effect to investors
Case Length : 19 Pages
Period : 2002-2010
Pub. Date : 2011
Teaching Note : Available
Organization : Microsoft Corporation
Industry : Information and Technology
Countries : US, Global

Abstract:

The case brings to the fore Microsoft's dividend policy. Founded in 1975, the company declared cash dividends for the first time in 2003 and continued its returns to the shareholders both in the form of cash dividends and share repurchases after that. In 2010, the company decided to raise a debt in order to pay the dividends and to repurchase shares while avoiding an adverse impact on its debt rating. The case deals with the dividend behavior of Microsoft Corporation and the fact that that it was not averse to taking a debt in order to pay dividends despite having a huge cash surplus.

Issues:

» Understand the usage of cash after Profit after tax (PAT).
» Understand the different ways of Repurchase of Shares.
» Analyze which is the better way to ensure returns to a shareholder - through cash dividends or repurchase of shares, or both?
» Discuss and debate the pros and cons of the dividend policy in comparison to cash dividend and repurchase.

Contents:

  Page No.
Introduction 1
Background Note 1
Dividend Policy 2
Exhibits 5

Keywords:

Dividend, Repurchase, Buyback, Open Market, Tender Offer, Dutch Auction, Targeted Repurchase, Green Mail, Special Dividends, Debt, Rating, Dividend Payout Ratio, Earning Per Share

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