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- Microsoft’s (NASDAQ:MSFT) announcement late on Monday that it would hike its quarterly dividend by nearly 11% and boost its share buyback program by another $60B are indicative of the tech giant’s “attractive” total return profile, Morgan Stanley said.
- Shares rose 1.9% in premarket trading.
- “Combined with mid-teens EPS growth, this supports a durable strong mid-teens+ total return profile at MSFT, framing an attractive risk/reward,” analyst Keith Weiss wrote in an investor note. Weiss has an Overweight rating and $506 price target on Microsoft.
- The size of the share buyback program is also an indication that buybacks are likely to continue, Weiss added.
- “Microsoft repurchased $12 billion in stock in FY24 (excluding shares repurchase to settle employee tax withholding – repurchases on cash flow statement were $17 billion) – we expect Microsoft to spend slightly higher levels on repurchases in FY25,” Weiss wrote. “As of June 30, 2024, $10.3 billion remained of the most recent $60 billion share repurchase program, however with the dividend increase announcement, the new share repurchase authorization was reset to $60 billion.”
- Microsoft has been able to reduce its weighted-average diluted shares outstanding every fiscal year since 2005, Weiss pointed out.