Microsoft’s Dividend Policy
In this chapter’s opening vignette, we discussed Microsoft’s decision to establish a dividend payout policy in 2003. Let’s find out what has happened to Microsoft’s (MSFT) dividend policy since the time of this announcement. We can address this issue by relying on the data that are provided in Thomson ONE.
Discussion Questions
1. To get information about MSFT’s dividend policy, enter its ticker quote (MSFT O) and select OVERVIEW> FULL REPORTS>THOMSON FULL REPORTS>FULL COMPANY REPORT. Click on STOCK & EARNINGS DATA and scroll down to the “Annual Historical Data” section. What has happened to MSFT’s dividend per share, dividend yield, and dividend payout over the past 5 years? Provide an explanation for what took place.
2. Compare this information with other firms in the same industry. To see how MSFT stacks up against its peers, select COMPARABLES>OVERVIEWS>PER SHARE DATA to get MSFT’s peers’ last annual dividends. Accessing COMPARABLES>OVERVIEWS>ABSOLUTE RANKINGS will give their dividend yields. You can also get this information from the VALUATION COMPARISON in this same section. Has MSFT behaved differently from its peers, or have there been industry wide shifts?
3. Refer back to the FULL COMPANY REPORT used in Question 1. Manually plot earnings and dividends over time. In the text, we point out that dividends are often more stable than earnings. Do you see a similar pattern for MSFT? Explain.
4. In the “Interim Financial Data” section of the FULL COMPANY REPORT, identify the dividend declared date, ex date, and pay date. Explain the significance of those dates. Go back to “Overview” and access the “Interactive Price Chart.” Can you observe price shifts around these dates? Explain what price shifts you might expect to see.
5. Investors are more concerned with future dividends than historical dividends, so go to ESTIMATES and scroll down to the “Consensus Estimates” section. Click on the “Available Measures” menu to toggle between earnings per share and dividends per share. How do analysts expect MSFT’s payout policy to behave in the future?
6. Refer back to the FULL COMPANY REPORT and scroll down to the “5 Yr Annual Balance Sheet” section. Does it appear that MSFT has been repurchasing any stock, or has it been issuing new stock?