Friday, September 10, 2010

Microsoft Gets an Earful From Investors

By Eric Jackson
RealMoney Contributor

9/9/2010 5:02 PM EDT
Click here for more stories by Eric Jackson

Last month, I filed a resolution with Microsoft (MSFT - commentary - Trade Now) to bring to a vote at the planned November shareholder meeting the issue of dividend policy. I am in favor of a drastic increase in Microsoft's regular quarterly dividend (perhaps along with additional stock buybacks) -- on the order of doubling it. The company could easily support such an increase out of its operating cash flow, and doing so would attract new buyers and raise the stock price.

During this past week, many other Microsoft holders have apparently been saying the same thing -- directly to Microsoft CFO Peter Klein.

Klein, along with Microsoft head of investor relations Bill Koefoed, was in New York this week to present at the Citigroup Technology Conference. He took time during his visit to stop in and chat with many institutional investors in the city. According to Klein's comments at the conference, the dividend issue was front and center in those discussions.

What's more, it appears as though the company's board is seriously considering the issues of an increased dividend, more buybacks and tapping the debt markets when money is so cheaply available.

In my resolution, I suggested strongly that Microsoft double the regular dividend. Klein's comments on this point and other related thoughts are laid out below.

Question: I'm curious about how high a payout ratio pro forma you'd be comfortable with. It could be the thing that really puts focus back on the stock in terms of all these other levers. If the yield is outside, or perceived to be outside, it just will drive the common price up. So, that analysis was, I think, about a 50% payout ratio. And you're around 25% now. So, is there any color you could give us about how comfortable you are in moving toward 50%?


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