Microsoft Pays First-Ever Dividend

Last week, Microsoft Corp. did something it’s never done before: paid dividends to shareholders. In all, on March 7, the company shelled out $850 million to shareholders, with nearly $100 million going to co-founder and chairman Bill Gates.

After the Redmond, WA-based software giant went public in 1986, the board spent the next 17 years electing to retain net income for contingencies. In January 2003, the company declared [1] a two-for-one stock split and a post-split dividend of $0.08 per share for stockholders on record as of Feb. 21.

By the end of 2002, Microsoft had amassed $43 billion in cash and short-term securities. Having so much cash on hand has been useful to the software developer, allowing the company to make investments and acquisitions as well as legal settlements. However, declining interest rates have lowered the return on cash and in turn, lowered the company’s return on equity.

Some analysts see Microsoft’s decision to issue dividends as a signal that the company has reached a new level of maturity and no longer sees itself as a startup. According to John Connors, Microsoft’s chief financial officer, the board is showing its confidence in the company’s long-term growth opportunities and financial strength.