Microsoft hits all-time high after hiking dividend and buying back more stock

Microsoft is showering more money on its shareholders. They are loving it.

Microsoft is showering more money on its shareholders. They are loving it.

Shares of Microsoft rose more than 2% Thursday to an all-time high after the company announced late Wednesday that it was boosting its dividend by 11%. It also authorized a new plan to buy back as much as $40 billion of its own stock.

Investors have been flocking to dividend-paying stocks this year, because yields for long-term US Treasury bonds are puny. Buybacks also help investors because they lower the number of available stock on the market, which helps boost earnings per share.

Microsoft is now worth nearly $1.1 trillion. The stock is up almost 40% this year and is the second-best performing stock in the Dow, trailing just Apple — the only other company with a market valuation above $1 trillion. Apple is up 41% so far in 2019.

But Microsoft can claim some bragging rights over Apple after the dividend increase, which takes effect in mid-December.

Microsoft's new quarterly payout of 51 cents a share (i.e. $2.04 annually) means that Microsoft's new yield will be 1.45%, up from a current yield of 1.33%. (The yield is the annual payment divided by the stock price.) Apple's dividend yield is 1.39%.

Still, both tech companies have surged this year thanks to healthy earnings outlooks. Microsoft has transformed itself into a cloud giant under CEO Satya Nadella while Apple investors are bullish about the company's growing services business (i.e. the App Store, Apple Music and the upcoming Apple Arcade and Apple TV+) and remain hopeful that the new iPhone 11 line will post solid sales.