Post Dividend, Will Investors Sell Microsoft?

Microsoft did the right thing, as expected, and is putting more of its free cash flow into its dividend.

Shares of Microsoft (MSFT) were down fractionally after hours, having closed the day at $31.17.

Announced after the close Tuesday (our post here ), the quarterly dividend increase was widely anticipated. We noted so in a research excerpt last week and a blogpost today.� While the increase is an improvement of 15%, or 3 cents, to 23 cents per share, that’s down from a 25% increase last year.

Hitting 23 cents-per-quarter was needed to prevent “a ‘sell-the-news’ event”– because “investors appear to be hiding in name despite increasingly negative PC data points in front of Windows 8 cycle,” says MKM Partners’ Israel Hernandez. He wrote last week that:

“at a 92-cents annual dividend, the 3% yield would be near the top of the technology peer group, providing protection for shares should Windows 8 disappoint.”

In a recent Barrons.com Weekday Trader, �Don�t Be So Hard on Microsoft,� Aug. 23, 2012 (subscription required), we said Windows 8 could redeem CEO Steve Ballmer despite fear that Windows 8 won’t be all it’s expected to be.

Microsoft does need to keep operating income strong, but with $29 billion in free cash flow, and roughly half of that in the United States, Microsoft has a nice cushion that should benefit shareholders to come.

Microsoft will pay the dividend December 13 to those who own the shares as of November 15; November 13� is the ex-dividend date, according to Microsoft’s dividend press release.