Microsoft's current dividend policy

Yes, Microsoft pays dividends. The company has paid a quarterly dividend to shareholders since 2003, and it raises that dividend most years. As of early 2024, Microsoft's quarterly dividend is $0.68 per share, paid four times a year, which works out to roughly $2.72 annually per share you own.

The actual dollar amount you receive depends on how many shares you hold. If you own 100 shares, you would receive $68 per quarter, or $272 per year. The company announces dividend increases in the spring, typically effective in the fall of that year.

Microsoft is one of the few mega-cap technology companies that pays dividends at all. Most large tech firms — Apple, Google, Amazon — either pay no dividend or a very small one. Microsoft's willingness to return cash to shareholders through dividends is one reason it's often held in retirement accounts and by conservative investors.

Key Takeaways

  • Microsoft pays a quarterly dividend of $0.68 per share as of early 2024, which you receive four times yearly if you own the stock.
  • The dividend yield — the annual payout divided by the stock price — typically falls between 0.7% and 1.2%, lower than bonds or savings accounts but higher than most tech stocks.
  • You receive dividends only if you own the stock on the ex-dividend date, which is set by the company each quarter.
  • Dividends are taxed as ordinary income in a regular brokerage account, but may be tax-deferred or tax-free in retirement accounts like IRAs or 401(k)s.
  • Microsoft has raised its dividend for over 20 years in a row, though past performance does not may provide future increases.

How dividend payments actually reach you

When Microsoft declares a dividend, the company sets an ex-dividend date — the cutoff for who gets paid. You must own the stock before that date to receive the payment. If you buy shares the day after the ex-dividend date, you will not receive that quarter's dividend; the previous owner will.

The payment itself arrives in your brokerage account automatically, usually within a few days of the payment date. You do not have to do anything to claim it. If you hold the stock in a taxable account, your brokerage will report the dividend to the IRS on a 1099 form. If you hold it in a 401(k) or IRA, the dividend is typically reinvested automatically without triggering a tax bill that year.

Many brokerages offer dividend reinvestment plans (DRIPs), which automatically use your dividend payment to buy more shares instead of sending you cash. This can be useful if you want to compound your holdings over time, though it creates more tax paperwork in a regular account.

What the dividend yield tells you

The dividend yield is the annual dividend divided by the stock price. With Microsoft paying $2.72 per year and the stock trading around $400 per share, the yield is roughly 0.68%. This is low compared to bonds, savings accounts, or utility stocks, but typical for a large technology company.

A low yield does not mean the dividend is not worth having — it reflects the fact that investors buy Microsoft primarily for growth, not income. The company has grown earnings and stock price consistently over decades, and the dividend is a bonus on top of that appreciation. A higher-yielding stock might offer more income today but less growth potential.

Yield changes as the stock price moves, even though the dollar dividend stays the same until the company raises it. If Microsoft's stock price falls, the yield rises. If the stock price rises, the yield falls. This is why comparing yields across different stocks or time periods requires context about what the stock price was doing.

Tax treatment of Microsoft dividends

In a regular brokerage account, Microsoft dividends are taxed as may have access to dividends at long-term capital gains rates — currently 0%, 15%, or 20% depending on your income level. This is better than ordinary income tax rates, but you still owe something unless your income is very low.

Your brokerage will send you a 1099-DIV form each January showing how much you received in dividends the prior year. You report this on your tax return. If you reinvest dividends through a DRIP, you still owe tax on the full amount, even though you did not receive cash.

In a 401(k), traditional IRA, or Roth IRA, dividends are not taxed when received. In a traditional IRA or 401(k), you pay tax when you withdraw the money in retirement. In a Roth IRA, you pay no tax on the dividends or the withdrawal, which is why Roth accounts are often good places to hold dividend-paying stocks if you have a long time horizon.

Why Microsoft pays dividends while other tech companies do not

Microsoft generates enormous cash flow — tens of billions of dollars per year — and the company has matured past the stage where it needs to reinvest all of that cash into growth. Paying a dividend is one way to return excess cash to shareholders. The alternative is buying back stock, which Microsoft also does.

Younger or faster-growing tech companies like Amazon or Nvidia typically reinvest all their cash into the business because they believe growth will create more shareholder value than a dividend would. Apple started paying dividends only after it had accumulated massive cash reserves and faced pressure from shareholders to do something with the money.

Microsoft's dividend policy signals to investors that the company is confident in its cash generation and does not expect to need that money for emergency expansion or acquisition. It also makes the stock more attractive to retirement funds and conservative investors who want some income alongside growth.

What happens if Microsoft cuts or suspends the dividend

Microsoft has raised its dividend every year since 2003, but that history does not may provide future increases. If the company faced a severe downturn or needed cash for a major acquisition, it could freeze or cut the dividend. This would likely cause the stock price to fall, because many investors hold Microsoft partly for the dividend income.

A dividend cut is rare for a company of Microsoft's size and stability, but it has happened to other blue-chip companies during recessions or crises. If you rely on Microsoft dividend income, you should treat it as a bonus rather than a may provide income stream, and diversify across other holdings.

You can track Microsoft's dividend history and announcements on the company's investor relations website, which publishes the ex-dividend date and payment date for each quarter well in advance.

Frequently Asked Questions

How often does Microsoft pay dividends?

Microsoft pays dividends quarterly — four times per year. The company typically announces the amount and dates in the spring, and payments are made in the fall, winter, spring, and summer. You can find the exact dates on Microsoft's investor relations website.

Do I have to own Microsoft stock for a certain amount of time to get the dividend?

You must own the stock on or before the ex-dividend date to receive that quarter's payment. You can sell the stock the day after the ex-dividend date and still keep the dividend. There is no minimum holding period beyond that one date.

What is the difference between a dividend and a stock buyback?

A dividend sends cash directly to shareholders. A buyback uses cash to repurchase shares from the market, reducing the total number of shares outstanding and increasing earnings per share. Microsoft does both. Dividends are taxed immediately; buybacks defer tax until you sell the stock.

Can I lose money if I own Microsoft and it stops paying dividends?

You would not lose the money you already received in dividends, but the stock price might fall if the company cuts the dividend unexpectedly. The dividend is separate from the stock price. You could own Microsoft, receive years of dividends, and still have the stock price fall due to business problems or market conditions.

Is Microsoft's dividend better than putting money in a savings account?

A high-yield savings account currently pays 4% to 5% annually with no risk. Microsoft's dividend yield is around 0.7%, but you also have the potential for stock price growth. A savings account is better for money you need in the next few years; Microsoft stock is better for long-term investing where you can tolerate price swings.