- $60 billion scheme unveiled by tech giant
- Microsoft spent about $20 billion on buybacks in year to June 2024
- Levels up Microsoft towards rivals like Alphabet and Apple
Tech giant Microsoft (MSFT:NASDAQ) has unveiled a 200% hike in its share buyback plans after announcing a monster new $60 billion scheme. This marks a significant shift for the company as it seeks to balance the short-term needs of investors with hefty investment in the long-run future of the business.
Data from Visual Capitalist in June 2024 showed Microsoft’s buybacks had been just a fraction of Big Tech rivals. In the year to June 2024, Microsoft spent around $20 billion on buying back its own stock, less than Meta Platforms’ (META:NASDAQ) $25 billion investment and miles behind the gigantic $83 billion and $63 billion buybacks of Apple (AAPL:NASDAQ) and Alphabet (GOOG:NASDAQ) over the same time frame.
This latest announcement promises to change that.
BALANCING LONG AND SHORT-TERM
‘Fundamentally, investors love share buybacks’, said AJ Bell investment director, Russ Mould. ‘They particularly love them when they are least expected, which is certainly the case for Microsoft. One might have expected the tech giant to spend all its surplus cash on AI-related investments, but it is clearly balancing the needs of the business with keeping shareholders happy’, he said.
Share buybacks reduce the amount of shares in issue and boost earnings per share. In turn, a higher level of earnings per share can boost the market value of a business.
Microsoft also announced a 10% rise for the quarterly dividend, in keeping with recent trends of tech companies increasingly paying more generous dividends to shareholders. But their preferred method of deploying surplus cash is to buy back shares.
Pre-market data has Microsoft stock rising around 2% to $439.31 when Wall Street reopens.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (James Crux) own shares in AJ Bell.
