SEATTLE – Microsoft, within weeks of announcing plans by CEO Steve Ballmer to retire, will probably boost its dividend amid calls by an activist shareholder to return more cash to investors.
ValueAct Holdings, which in April disclosed a stake of about $1.9 billion in the world’s largest software maker, has been seeking a return of more money, according to a person with knowledge of the matter. Microsoft is poised to increase the quarterly dividend by 13 percent to 26 cents a share, according to data compiled by Bloomberg.
Microsoft’s policy for the last several years has been to boost the quarterly dividend in September in line with increases in operating income, which rose 23 percent in the latest fiscal year. While too big a payout might require Microsoft to incur a tax on cash held overseas, an overly modest increase would put the company at odds with investors clamoring for more.
Microsoft has a target on its back, said Kim Caughey Forrest, an analyst at Fort Pitt Capital, a company in Pittsburgh that manages $1.4 billion in assets, including Microsoft shares.
It wouldn’t surprise me if technology companies that generate a lot of cash, regardless of where it’s domiciled, would consider bigger dividend increases, because the activist investor has really come into play in the last 18 months, and not just at Microsoft.