Mutual fund investors may experience something less than a windfall from a landmark $32 billion, or $3 per share, dividend payment, from Microsoft Corp, but growth and value investors may still appreciate the gesture for different reasons, The Wall Street Journal reports.
Value funds, which typically concentrate on long-term investments in rock-solid companies, are more likely to benefit from the dividend payment than aggressive growth fund investors, according to some industry experts.
Microsoft stock occupies the No. 2 position in terms of holdings in the Vanguard 500 Index fund, which is currently the largest mutual fund. Other large mutual funds that have loaded up on Microsoft include the Fidelity Magellan Fund and American Funds' Growth Fund of America, according to Thomson Financial, sister company of the publisher of this news service.
Growth fund investors may like Microsoft's plan to repurchase $30 billion of its stock during the next four years and double its annual dividend to 32 cents per share, or $35 billion, which will significantly reduce the number of outstanding shares. Meanwhile, value investors may load up on the stock because of long-term plans to raise dividends. Many value funds are bound by investment guidelines to buy companies that pay dividends, but growth funds often focus on earnings. Microsoft potentially appeals to growth investors because its some of its business lines have increased revenues by 20% per year.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.