Microsoft has announced it would pay a $32 billion special dividend to its shareholders, while buying back $30 billion of its shares over the next four years and doubling its regular dividend payment.

Pending approval by shareholders, the special dividend of $3 a share will be paid out on Dec. 2. The annual dividend will be increase to 32 cents a share, or about $3.5 billion a year.

Observers say Thursday’s announcement is an answer to critics who believe the software giant is too conservative with its cash, the Business Standard reported. Even though the payout will be the biggest of its kind, some were still hoping the software giant would take a more radical approach.

Charles Di Bona, an analyst at Bernstein Research, said, “I would have preferred to see more of that up front rather than over four years.” He also questioned Microsoft’s decision to leave its dividend yield below the level of the broader market. The shares will yield 1.1 percent, compared to about 2 percent for the Standard & Poor’s 500 index.

Steven Neimeth, senior portfolio manager at AIG SunAmerica Asset Management, who runs several actively managed funds, told Business Week that Microsoft's moves may boost the stocks of cash-rich companies such as Limited Brands and Hewlett-Packard. "I think we're going to see more dividend and buyback announcements from companies in the coming months,” he said.

Legal settlements over the last several months set Microsoft’s payout plan in motion.

Microsoft has been reluctant to pay out cash due to the uncertainties created by anti-trust cases and the company’s preference to use the money for investments.

But last month, the court threw out the last challenge to the company’s settlement with the U.S. Justice Department. Two big private anti-trust suits, brought by Time Warner and Sun Microsystems, have been settled as well. In addition, the company’s investments haven’t always been good ones. Microsoft lost $10 billion in cable and telecom investments during the boom of the 1990s.

Shareholder Richard Steinberg, head of Steinberg Global Asset Management in Boca Raton, Fla. told Business Week: "Microsoft could have used the money for some potentially disastrous deals. This eliminates the notion of them doing something stupid with that money."