Briefly Noted

    Microsoft Dividends: Take the Money and Run?

    “Investment pundits in general and Microsoft shareholders in particular cheered the recent announcement of $32 billion (that’s billion with a “b”) dividend distribution to pare down its Brobdingnagian cash hoard. This may spur other companies with lots of stash to either buy back shares or pay out a large dividend. While I don’t want to rain on the shareholders’ parade, the shower of dollars may portend something far less cheerful. Way back when I was studying finance in college, I learned more than once that the reason a company distributes a dividend is because management has concluded that the company is not likely to earn a better return on that money than the shareholders themselves could earn. Perhaps that theory is old-fashioned, but I doubt it. So is it possible that Messrs. Gates, et al., have decided that Microsoft has pretty much exhausted its ability to develop innovative and highly profitable products and instead are doling it out to shareholders who can come up with more profitable investment ideas?”

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