Microsoft has announced a $40 billion share buy back scheme, which amounts to re-purchasing around 10% of the company’s $440 billion market cap. This is Microsoft’s second $40 billion buy back program.
The first round of this buy back will complete by the end of 2016, and Microsoft also announced that it would raise its dividend by $0.03 per share to $0.39 per share for the quarter.
Share buy back schemes are normally designed to make companies more attractive to investors by raising the share price and also reward employees who have been paid in shares.
It is also seen some times as a sign that a company does not have anything better to do with their savings to raise their share price, and are better off simply giving their profits back to investors. Microsoft has however made some big moves recently in purchasing LinkedIn for $26.2 billion, so one could not really say they have not been making significant moves with their cash.
Microsoft is currently close to it’s all time share price high of $60 per share, and the buy back announcement has boosted its price by 1.21% in after-market trading to $57.50 per share.