Dividend Payouts Surpass Stock Buybacks at Microsoft

Microsoft has made a significant shift in its capital allocation strategy, with dividend payouts surpassing stock buybacks for the first time. In fiscal 2021, the company spent $27.4 billion on share repurchases and $16.5 billion on dividends. However, by fiscal 2026, Microsoft's latest annual report shows that it paid out $27.0 billion in dividends, compared to just $16.7 billion in stock buybacks.

The software giant currently pays a quarterly dividend of $0.91 per share, or $3.64 on an annualized basis, which translates to a modest 0.7% dividend yield relative to dedicated dividend stocks. However, the pace of growth is notable, with declared dividends per share climbing approximately 10% in fiscal 2026, matching the roughly 10% increase delivered in the prior fiscal year.

Underlying earnings offer ample support for further payout growth, with Microsoft generating $133.7 billion in net income during fiscal 2026, a 31% surge from fiscal 2025. The company last announced a dividend increase in mid-September 2025 and has maintained that quarterly rate for four consecutive payouts, signaling another hike may be on the horizon.

Share buybacks have evolved into the more flexible component of Microsoft's capital return strategy, with the company repurchasing $16.7 billion of its stock in fiscal 2026, up from $13.0 billion in the prior year. However, even when including an additional $5.6 billion in shares bought back to cover tax obligations on employee stock awards, total cash spent on repurchases still fell short of the $26.4 billion Microsoft paid out in cash dividends during the period.