Microsoft doubles size of dividend

Microsoft yesterday said it plans to double the size of its dividend for the 2004 financial year to 16 cents per share. The announcement marks only the second time that the software group has paid a dividend to investors, after its decision to begin earlier this year with an eight cents per share payout.

The new dividend will be payable on November 7 to shareholders of record at the close of business on October 17.

Microsoft is sitting on $49bn in cash and there has been much speculation on Wall Street about what it might do with the money. The company generates more than $1bn of cash flow each month and had been under increasing pressure from investors to lift its dividend or buy back shares.

"It's a step in the right direction, but we all know that with nearly $13bn a year in free cash flow, the company can afford a lot more," said Jason Kraft, analyst at AG Edwards & Sons.