Microsoft Flips Dividend-to-Buyback Strategy, Boosts Payout Ratio
Microsoft's annual report for fiscal 2026 shows that the company has flipped its capital return strategy. For years, Microsoft spent more money buying back its own stock than it paid out in dividends.
The situation changed with fiscal 2024, when dividends declared passed buybacks. According to the report, $27.0 billion of dividends were declared against $16.7 billion of stock repurchased under the company's buyback program in fiscal 2026.
The dividend yield is about 0.7%, but it's growing quickly, with a 10% increase in dividends declared per share in fiscal 2026 and the previous year. The payout ratio sits near 20%, making it easy for Microsoft to afford.
The company repurchased $16.7 billion of stock in fiscal 2026, up from $13.0 billion the year before. However, this buying barely moves the share count anymore, as the net effect is a reduction of about 0.1% in the share count over five years.