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Corporate Finance Assignment: Dividend Payout Policy of Microsoft

3 Do payouts reflect attempts by the (Microsoft) firm’s insiders to signal firm quality to the market? The dividend per share of Microsoft is increasing over five years, along with the revenue. The insiders of Microsoft do not require showing the shareholders how strong is the company’s position; the financial shows it and is well supported by the dividend payout policy of the government. The company is using both the repurchase policy as well as dividend payments regularly. The dividend per share, as stated, is showing an increasing trend, and the company has approved repurchase policy in 2016, which completed on Feb 2020. After that, a new repurchase policy is again approved with no expiry date, and the repurchase is continuing every quarter. The company is having the return higher than the average return of the S&P 500 index as well as the NASDAQ Computer index over the five years. Thus the company has higher returns, and after fulfilling its investment requirement, the company is paying the shareholders their share of profit from the company. The investment requirement of the company is also high, and it is only through these various investment in new and improved products as well as its security. The dividend policy is excellent as it provides both the options to the shareholders to sell their shares or retain and get the continuous dividend over the years. This is also reflected in the pricing of the shares as the price of the shares or valuation of the company in the form of market capitalization is increasing over the years (Sherman 2015). The prices of the shares have fallen during March 2020 but after that have again started increasing, which not only gained its earlier position but also improved and reached its highest levels during August 2020. The management decision regarding the dividend payout is helping to boost the shareholder's confidence as only strong financials without actual benefit to the shareholders in the form of dividend or buyback of shares at a higher price would instigate a doubt on the working of the company and thus policies well support the position as reflected in the books and annual report of the company (Pucheta-Martiinez & Garcia-Meca, 2019). The increase in the revenue and margin of the company is the key to such a strong market position of the company. Thus the policy of the regarding the dividend payout should be continued so that the trust of the various stakeholders of the company keeps on increasing. This is helping in creating and maintaining the goodwill of the company. Further it will give an insight into the ability of the management in transferring the benefits to the stakeholders which in turn will attract more investors. References Carlon, S. (2019). Financial accounting: reporting, analysis and decision making. 6th ed. Milton, QLD John Wiley and Sons Australia, Ltd Dividend Diversify. (2020). Microsoft Stock Analysis & Dividend Review (MSFT). Retrieved from https://dividendsdiversify.com/Microsoft-dividend/Mersland, R., & Urgeghe, L . (2013). International Debt Financing and Performance of Microfinance Institutions, Strategic Change. 22, 36-47 Peirson, G, Brown, R., Easton, S, Howard, P. & Pinder, S. (2015). Finance, 12th ed. North Ryde: McGraw-Hill Australia. Pucheta-Martiinez, M. & Garcia-Meca, E. (2019). Monitoring, corporate performance and institutional directors. Australian Accounting Review, 29(1), 208-219. Sherman, E. (2015). A manager's guide to financial analysis : Powerful tools for analyzing the numbers and making the best decisions for your business (6th ed) Ama Self-Study Yahoo finance. (2020). Microsoft Corporation (NASDAQ:MSFT) Has Got What It Takes To Be An Attractive Dividend Stock. Retrieved from: https://finance.yahoo.com/news/microsoft-corporation-nasdaq-msft-got-144852143.html


Subject Name: Finance

Level: Undergraduate


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