So much for the claims about how this will never occur http://biz.yahoo.com/ap/030117/microsoft_3.html Andy
According to the story, this is not the beginning of regular quarterly dividends. It's 8 cents per share ... and we will review it next year. STRONG BUY. I see it as a small lobbying charge to pass Bush's tax travesty that might just benefit Bill Gates and his heirs forever just a tad.
I am pretty sure every company that issues dividends has a similar disclaimer. Yes, Bill Gates is well known for his lack of being philantropic. Andy
It's 8 cents a share before the split - soon it will be 4 cents. That is a nothing dividend. It is 0.0014 percent interest rate on the price of a share. You would be better off in a simple savings account. Microsoft will never give real money returns because it can't.
not true. "After Microsoft splits its stock 2-1, the Redmond-based company will pay its first dividend -- 8 cents per share. The split takes effect Jan. 27, the company said late Thursday." Andy
Wrong-o Andy -- News account indicates that this is not the start of quarterly dividends. Anything less than a program of quarterly divs should be regarded as nothing more than a publicity stunt. No investor (well no investors with a brain) would take this into account in determining future returns on Microsoft stock. See below: "The dividend is payable March 7 to shareholders of record Feb. 21. Microsoft will review the dividend program regularly, but hopes to make it an annual payout, Connors said." what does this have to do with the fact that he will get a gargantuan benefit under the Bush plan?
Absolutely not wrong. You seem to think I think this is a quarterly dividend. Considering I neither said that nor quoted any part of your post that had to do with that, I have no idea where you get off saying "wrongo" I specifically quoted the part where you seemed concerned that they were going to review the dividend next year. I will reiterate my point since you missed it the first time. Every company that issues either quarterly or yearly dividends all give some sort of disclaimer that they will be constantly reviewed as to whether they will be given in the future. One could argue, based on the fact that he is one of if not the largest charity giver in the world, that Gates will do more public good with the tax savings than the government would in collecting the taxes. Andy
Two things: 1. Microsoft has over $43 billion in the bank. What this really indicates is that they're running out of ideas on how to spend that $43 billion. But instead of giving all the money out, they're giving 2% of it. 2. This amounts to 0.3% dividend, which in real tax-free terms would amount to about 0.4 - 0.45% for the average middle-class investor if it were paid after the tax bill passes. In the general scheme of things this is such a small amount of MSFT's TSR that it's not worth discussing for most Wall Street investors. A lot of people would end up paying more in broker's fees than they'd make on the dividend if they decided to buy the stock on this news. Hence, Wall Street acted accordingly: On Friday when this was announced, MSFT was down (due to a variety if things, including downward estimates in revenue growth). The Street is not excited over this. Andy, I know you'd love to think that the plan to make dividends tax-free to investors will result in a lot more dividends, but this isn't the proof by a long shot, and even if they said that they were doing it strictly for the tax break it wouldn't amount to enough for most investors to make a difference.
Obie, I know you'd love to believe that you are the be all and end all to financial discussions, but after taking your word a few times only to see it immediately be wrong, I have learned to take what you say with a grain of salt. I mean for gods sake, one week ago you were willing to lay down your life claiming that Microsoft would never issue dividends because it made no financial sense. I guess there was some wiggle room in there for dividends, however small. Andy
Man in the mirror syndrome, eh Andy. Seriously, the point here is that IF MSFT decided to issue regular dividends, it would have said so. It doesn't so it didn't. In reality, they decided to pay a dividend for some other reason. My suggestion is that a throw-away dividend announcement adds some boost to the Bush plan which, when all is said and done, just might make the estate tax repeal permanent rather than sunsetting after 2009. That would be a nice little plum for the charitable Mr. Gates ... and Steve Ballmer/other execs as well.
I think it is more pressure from their own stockholders, as thier stock is clearly not a growth stock anymore. If you bought it anytime in the last 4.5 years, you most likely lost money. For a while now they have been asking Microsoft to distribute some of their bank account, which is often spent on poor investments.
How can it be man in the mirror syndrome when I already stated that I have taken Obie at his word multiple times? I know very little about finances which is why I was drawn to Obie's comments. Much like on the rest of Big Soccer, one needs to extrapolate the people who talk a good game from the people who understand the game Note: I am not saying Obie does not understand finances much better than I do, but now I know a little better when he says something absolutely will never happen that there may be some wiggle room. I have not read a single place where this is one time. In every article about this, they said they will be reviewing the policy in a year, which is no different than most companies who offer dividends. Do you have a link to an article which emphatically states this is one time only as I may have missed it? Andy
According to the article I read (going from memory here), they said that they'd settled a couple of lawsuits, so had less need for cash on hand.
I read this as well Dave. I guess what they meant was that they felt they could give up a small amount of their cash because their liability had been reduced. Is that how you read it? Andy
OK, Andy. I'll attempt to put away all snideness and slippery sarcasm. As Obie said, a dividend this small with no hint that it will be a regular occurrence is irrelevant to the value of MSFT stock. You are not correct about dividend-paying companies. Many are very serious about their dividend policies and think long and hard before starting dividend payments (look at MEOH last year e.g.) or increasing dividend payments because they are very reluctant to reduce dividends at a later date. See, eg., JNJ with a history of regularly increasing dividends in proportion to stock growth. These companies do not want to come back to their shareholders with a prospect of reducing dividends because quarterly dividends increase the value of the stock. MSFT has basically made no commitment, so why bother? It is actually a slap in the face to the shareholders because MSFT now basically has no credible policy on dividends. It might not be unprecendented for a company to pay a small dividend in the off-hand fashion that MSFT has approached this dividend, but what MSFT has done, considering the market cap of the company, is I think unusual.
monop_poly, I appreciate and agree with most of your last post (accept for the part where most companies who give out dividends always have in the small print that they will be reviewed in the future). What has me puzzeled is throughout this thread you have maintained that this dividend is without a doubt a one time only affair and yet when asked for a link about this, you did not answer answer. Have you now changed your position to be that you really have no way of knowing whether MSFT will issue another dividend or not? I am just trying to find some common ground here because I can't figure out if you have some information that I have not seen. If you have some information that unequivacally states that MFST is offering this once and only once, some of my opinions may change. Andy
I believe that what I said was that making dividends federal income-tax free would not lead to an increase in companies paying dividends, because (a) for companies the bill is tax-neutral, and (b) there was nothing in the bill that made retained earnings less valuable to companies than dividends. There's nothing that Microsoft has done that makes this different. Spejic has it right -- growth companies don't pay dividends, mature ones do. Microsoft is becoming a mature company that sees fewer opportunities for investment. This has nothing to do with the tax cut. If it did have to do with the tax cut, shouldn't they wait until it actually passes to pay it? If the purpose of the tax cut was to get more companies to pay dividends, they should make the payments tax-deductible to the company, not tax-free income to the recipient.
Yes, that's how I read it. My memory of the article is that it was presented in a rather off-hand way. I mean, this is the first ever dividend from one of the biggest companies in the world, and possibly the most cash rich company. And a company that is rather, um, controversial in general, and in the news, and involved in politics and policy. PLUS, it came in the immediate wake of Bush proposing a plan to encourage this sort of thing. Put it all together, and I would have thought it to be much, much, much bigger news than it was. It was in the business section, not the general news section of the paper, and even in the business section it was a big story. My layman's mentality was that 1) I have no clue why this wasn't a bigger story...it seems big to me. 2) OTOH, the fact that it was NOT a big story, that it was so afterthought-y, made me think that obie's and monop's take is correct. It's no big deal, no harbinger of future Microsoft dividends nor of other companies reacting to Bush's proposal. And I'd intuitively understand why if I were the sort of person who follows dividend news closely.
If I said it is a one-time dividend, I didn't mean it literally. Obviously, this isn't a situation where the company has sold assets or spun off a piece of its business in an IPO, then distributed a one-time large dividend to shareholders. Rather, MSFT has curiously tossed out a miniscule dividend payment for, it seems, no particular reason. I find it quite curious. The most reasonable conclusion among investors is that the company is very unsure (or indifferent) about its basic strategic direction in terms of distributions and other ways to increase a shareholder's investment return. Is this really the message MSFT wants to send to current and potential shareholders?
A little fun with math based on this news. In Bush's first economic stimulus plan, he gave $300 to every taxpayer (no need to get into details, just play along for now). So, I was curious what it would take to get a $300 benefit under the no-tax-on-dividends proposal based on Microsoft's news. At .08 a share, you would need to own 3,750 shares to receive a $300 dividend. When I just checked, Microsoft was trading at $51.33. Multiplied by 3,750 shares, that's $192,487.50 Let's be kind and round up a mere $12.50 for a broker's fee(Ameritrade or something). So, the people who get a similar tax break under the Stimulus Plan II are those with at least $192,500 invested in Microsoft stock and who hold it in something other than a 401(k), IRA, annuity or other tax shelter. Good for them, whoever they are.