September 21, 2011 2:52 am

Microsoft raises dividend by 25%

Microsoft has raised the dividend on its shares by 25 per cent, the biggest increase in the eight years it has made the payments, though the move still falls short of some demands for it to use more of its cash pile to reward shareholders.

The world’s biggest software company announced on Tuesday that the payment would be increased by 4 cents a quarter, to 20 cents. The move marks an acceleration of recent dividend raises, following an increase of 23 per cent last year and of 18 per cent the year before.

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At 2.97 per cent, the payment leaves Microsoft with one of the highest dividend yields among big tech groups, which have traditionally not relied on dividends as a way to reward shareholders.

Investors have increasingly focused on the dividend as Microsoft’s shares have failed to break out of the range in which they have traded for more than a decade, despite steady growth in earnings. However, despite a one-off payment of $3 a share in 2004, the company has resisted pressure to distribute more.

Earlier this year, Microsoft disclosed for the first time the exact proportion of its cash held outside the US, with $45bn of its $52.8bn in other countries. The money is unavailable for corporate purposes such as dividend increases unless the company first repatriates the cash and pays a tax, prompting it in recent years to turn to bond issues to boost its financial flexibility.

IBM’s shares yield 1.7 per cent, while Hewlett-Packard’s dividend payments give it a yield of 2.1 per cent. However, Intel, which dominated the PC era alongside Microsoft, has pushed through a series of big raises that have lifted the yield on its stock to 3.8 per cent.

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