Of Microsoft's dividend payout


The big financial news yesterday was Microsoft's announcement that they would be spending billions on a stock buy-back and dividend program.

An additional piece of [information_ from CNet this morning indicates that Bill Gates will be donating $3B of his booty to The Bill and Melinda Gates Foundation, his charity.

The program announced is interesting, in that it is probably the largest move to push cash out to investors in US history.

The basics are that the company is putting out about $75B in cash to investors over the next 4 years. Of this, $30B will be in a stock buy-back, and the remainder will be done through a special one-time dividend of $3/share and an increase in the annual dividend rate from $0.16/share to $0.32 per share (now paid quarterly instead of annually).

The catch? Not much, except that the special dividend won't happen unless the shareholders agree to a compensation program to compensate the company's option holders for the expected drop in price due to the payout.