Microsoft set for $40bn stock buyback as dividend rises

Cash-rich Microsoft raised its quarterly dividend by 8% on Tuesday, and announced plans to buy back as much as $40bn of its own shares.

The US tech giant launched a similar buyback program in 2013, which is expected to be completed by the end of 2016.

The dividend rise is lower than previous years, with an 8% increase to 39 cents per quarter in 2016, compared with a 16% increase last year, and 11% in 2014.

Buying back shares is a tactic that has been used by Microsoft since the company experienced poor revenue growth in the 1990s, and introduced it along with generous dividends to boost its earning per share.

The company’s shares are up 31% in the last year or so, rising 1% in after-hours trading on Tuesday.

The new buyback program has no expiration date and may be terminated at any time, the company said on Tuesday.

"Microsoft Corp. today announced that its board of directors declared a quarterly dividend of $0.39 per share, reflecting a 3 cent or 8 percent increase over the previous quarter’s dividend," the Microsoft press release said.

"The board of directors also approved a new share repurchase program authorizing up to $40 billion in share repurchases. The new share repurchase program, which has no expiration date, may be terminated at any time."