As of June 2004, Microsoftâs quarterly dividend was four measlycents per share. With $50 billion of cash on hand, on July 20th ofthat year, the company announced a one-time âspecial dividendâ of$32 billion, or $3 per share. Should the Microsoft investors havebeen happy that they were to be receiving gobs of cash in the formof this special dividend? Seems like a funny question. Is winningthe lottery a good thing? Am I better off getting a bonus, or not?Unlike these windfalls, shareholders receiving dividends are simplygetting what is already theirs. Before receiving the dividendcheck, they already owned that cash, because they own everything ofthe company's. "Wait!" you say. "Didn't we discuss that receiving adollar today is more valuable than receiving it in the future?"Indeed, it is, but... that's if you are comparing having a dollartoday, which you could invest and earn some rate of return on,versus receiving just one dollar in the future. That's not whatwe're talking about in the dividend decision. If you, theshareholder, get the dividend now, you'll invest it in something orother, and earn some investment return. Conversely, if you do notget the dividend now, this company will retain the funds and investthem in the company's activities, and (presumably) earn someinvestment return. How do you feel now about the Microsoftdividend?
As of June 2004, Microsoftâs quarterly dividend was four measlycents per share. With $50 billion of cash on hand, on July 20th ofthat year, the company announced a one-time âspecial dividendâ of$32 billion, or $3 per share. Should the Microsoft investors havebeen happy that they were to be receiving gobs of cash in the formof this special dividend? Seems like a funny question. Is winningthe lottery a good thing? Am I better off getting a bonus, or not?Unlike these windfalls, shareholders receiving dividends are simplygetting what is already theirs. Before receiving the dividendcheck, they already owned that cash, because they own everything ofthe company's. "Wait!" you say. "Didn't we discuss that receiving adollar today is more valuable than receiving it in the future?"Indeed, it is, but... that's if you are comparing having a dollartoday, which you could invest and earn some rate of return on,versus receiving just one dollar in the future. That's not whatwe're talking about in the dividend decision. If you, theshareholder, get the dividend now, you'll invest it in something orother, and earn some investment return. Conversely, if you do notget the dividend now, this company will retain the funds and investthem in the company's activities, and (presumably) earn someinvestment return. How do you feel now about the Microsoftdividend?
