Is It Time For Microsoft To Double Its Dividend

Ticonderoga Securities analyst Neil Herman points out in a research note this morning that the software giant has a history of increased its payout in September. He thinks the company “should and will” do the same thing following an upcoming September board meeting. Herman’s view is that the company should match the payout ratios of peers – a move that he says would involve more than doubling the current rate of 64 cents a share. The stock currently yields 2.5%. “We believe that a large dividend increase would be a major catalyst for the stock, particularly in these uncertain times,” he writes.

Herman explains that he compared the company’s operating cash flow and free cash flow to the company’s 12 largest dividend paying peers, and the net income payout of the 171 largest dividend paying companies. He writes, “If Microsoft were to match it peers on payout ratios, it would equate to a dividend yield increase to 6.0% from the current [2.5%], and include an approximate doubling of the company’s dividend. By doubling its dividend, Microsoft’s payout ratio would be close to the average of other large-cap companies.

Source: Forbes

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