Dividends4Life: Microsoft Stock Benefits From Large Buybacks

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Microsoft Stock Benefits From Large Buybacks

Posted by D4L | Sunday, September 29, 2019 | | 0 comments »

Microsoft (NASDAQ:MSFT) stock has done very well this year, up almost 35% so far. MSFT stock is still reasonably priced despite the stock rise. Its forward price-to-earnings ratio is at 23 times. MSFT stock sports a healthy 1.34% dividend as well. Investors may not know that one of the main reasons for MSFT stock’s success is its large share buyback program. In the year ending June 30, MSFT spent over $19.5 billion on share buybacks. This is an increase of 82% over the previous 12 months.

The share buybacks were even larger than the $13.8 billion MSFT spent on dividends in the year to June. What was the main reason for this? Microsoft produced a massive $38.3 billion in free cash flow (FCF) in the year to June. Microsoft spent $33.35 billion on share buybacks and dividends from this FCF. Keep in mind that FCF already includes money spent on huge costs and investments. It includes $16.9 billion spent on R&D, $18.2 billion in marketing, all of MSFT’s operating costs. It also includes $13.9 billion spent on capital expenditures.

Source: InvestorPlace

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