Microsoft Showing Shareholders A Lot Of Love With Dividend Increases, Buybacks

Macquarie Research expects Microsoft Corporation (NASDAQ: MSFT) to maintain its pace of cash return to its shareholders. Currently, the software major is engaged in $3.5 billion cash return per quarter. The comments come on the heels of the company disclosing a fresh $40 billion share buyback program and an increase in dividend rate to $0.39 a share.

Analysts Sarah Hindlian and Frederick Havemeyer expect the latest share repurchase program to go through until the year 2019 or 2020. The company has not fixed any expiration date for the latest program, much like the earlier program announced in 2013. The previously disclosed $40 billion share buyback program is expected to be completed before the current calendar year ends.

Related Link: A New ETF With A Dynamic Fee Structure

"We note that Microsoft's $19.75 billion August debt raise was likely undertaken to finance its acquisition of LinkedIn Corp (NYSE: LNKD), which the company noted it would fund substantially through the issuance of debt. This $19.75 billion debt raise represents 75 percent of the $26.3 billion LinkedIn deal value," the brokerage said in a research note.

The lead analyst thinks Microsoft is not likely to engage in any big acquisitions, at least in the immediate term, as it needed time to digest its LinkedIn acquisition. Incidentally, it was the biggest single acquisition for the software firm.

Following the debt issue, the brokerage revised its adjusted EPS estimate by $0.04 a share to $2.72 in fiscal year 2017 and by $0.03 a share to $3.12 in fiscal year 2018. Similarly, for the fiscal year 2019, the analysts have revised their adjusted EPS projected by $0.02 a share to $3.35.

Macquarie maintains its Neutral rating and $54 as the target price for Microsoft shares.

At time of writing, Microsoft was slightly up at $57.86 and LinkedIn was trading flat on the day.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!