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Microsoft Urged to Pay Utility-Sized Dividend: Chart of the Day

Microsoft Corp.’s shareholders deserve the kind of dividends paid by utilities, telephone companies and cigarette makers, according to a hedge-fund manager cited by Whitney Tilson, a managing director of T2 Partners LLC.

The manager recommended that the world’s largest software maker more than double its annual payout, to $1.48 a share, in a letter to Microsoft’s board last month. Tilson, whose funds also own shares, published the correspondence on the Seeking Alpha financial website two days ago without naming the writer.

The CHART OF THE DAY shows the projected dividend yield for Microsoft since 2006, three years after the Redmond, Washington-based company began making payouts. The chart also provides the comparable yield on the Standard & Poor’s 500 Index.

Microsoft’s 2.4 percent estimated yield as of yesterday would have been 5.6 percent with the higher payout. The latter figure is in line with projections for Pepco Holdings Inc., the S&P 500’s highest-yielding utility; AT&T Inc., the biggest U.S. provider of phone service, and Altria Group Inc., the country’s largest cigarette producer.

The unnamed manager, who wrote that his funds have owned Microsoft since 2006 and had more than 11 million shares at the time of the letter, called on the board to pay out all the cash generated in the U.S. and available to investors as dividends.

There were three more recommendations made in the letter: selling $40 billion of debt, buying back shares with funds from the bond sale, and borrowing against cash generated outside the U.S. for additional stock repurchases. The investor estimated that Microsoft would reach the high $30s if all of them were adopted. The stock closed yesterday at $26.63.

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