DIVIDEND POLICY OF

Our team members are…..

Abhilash KumarAkanshaAnupam kaulGaneshkrishna Kuldeepak PrabhuGaurav Kumar ThakurKanik VijayIsha Mishra

Agenda

IntroductionAbout the caseDividend policyCash dividendsTypes of repurchaseAdvantages of dividendReason for taking debt

Introduction

Microsoft is an multinational computer technology corporation.

The history of Microsoft began on April 4, 1957, when it was founded by Bill Gates and Paul Allen in Albuquerque.

In 1980, Microsoft formed a partnership with IBM that allowed them to bundle Microsoft’s operating system with IBM computers, paying Microsoft a royalty for every sale.

In the year 1986 the company went public to raise $61 million capital.

In the year 1996 Microsoft interred into internet segment.

About case

This case is all about Dividend Policy used by Microsoft corporation.

Microsoft has not paid divined for 28 years. It believes in ploughing back money into its research and development.

In year 2003 the company declared its first ever dividend for common stock.

Microsoft continued its return to the shareholders both in the form of cash dividends and share repurchases.

The management of the company decided to raise a debt of $6 billion in order to pay for the dividend and the share buyback.

Dividend policy

There are four different ways to give dividend to its shareholders….a) Cash dividendb) Bonus sharec) Share splitd) Shares buybackBetween year 2003 to 2010 the company paid dividends to its shareholders in the form of cash dividend and buyback of shares.

Cash dividend

They provide the cash to their shareholders from their…..a) Reserve and surplusb) Other accounting sources(debt).Here is some detail about cash dividend of Microsoft……

Types of repurchases

1) Open market operation: Company can buyback its share through authorised broker in open market.

2) Tender offer: In this company will specify the purchase price, total amount and period within which shares will be bought back.

3) Dutch auction: In this Auctioneer begins with a high asking price which is lowered until some participant is willing the auctioneers price is reached. The winning participant pays the last announce price.

4) Targeted price: A target company attempts to stop a hostile takeover by buying back its own stock and shares, often pays a premium above the market price.5) Greenmail: A premium paid to a rider to get him/her to terminate a takeover attempt.

Advantages of Dividends

1) Return to surplus cash to shareholders.2) Tax savings by companies.3) Enhancing shareholders value.

Reason for taking debt in spite of having surplus cash

1) To provide dividend to its shareholders Microsoft went for debt because they did not want to return the cash which has been invested outside the US as it would have to pay the tax.

2) The Federal Reserve move to soften the interest rate made it attractive for the companies with highest rating to raise the debt at cheapest rate.

CONCLUSION……