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Microsoft dividend could boost other stocks
(AFX UK Focus) 2004-12-02 22:23 GMT:

http://www.iii.co.uk/shares/?type=news&articleid=5134952&action=article

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SAN FRANCISCO (AFX) - Even investors who don't own Microsoft shares may benefit from the $32.6 billion cash dividend the company paid to its shareholders Thursday. That's because recipients of the dividend payout - the largest of its kind -- are likely to plow at least some of the money back into the market, either in the tech sector or in dividend-paying stocks, fund managers said. Microsoft , bowing to demands that it share some of its huge cash hoard with shareholders, paid a one-time dividend of $3 a share.
The payout was worth more than the combined market value of software makers Seibel Systems , PeopleSoft , Adobe Systems and BEA Systems , and it could prove a catalyst for other tech stocks in December.


That's because investment professionals who are looking to improve returns by year-end may decide to place bets on tech stocks to capitalize on their penchant for rapid price swings, also known as volatility or beta. Many managers are scrambling to catch up with the indices that serve as their main performance benchmarks, said Romeo Dator, co-manager of the All American Equity Fund for US Global Investors in San Antonio, Texas.
"For people who are behind their indices, tech is the high-beta play," said Dator, whose fund's top holdings include tech firms eBay and Qualcomm , as well as dividend-paying stocks like General Electric .


Dator, whose fund owns 5,000 Microsoft shares, declined to comment on what he would do with the proceeds that the Redmond, Wash.-based company transferred into his fund's coffers as a result of the dividend payout. But the dividend is "a good way to return money quickly to shareholders," as it would add to the "fairly large pile of cash" that investors have on the sidelines. Another investor said Microsoft's decision to return billions to its shareholders could boost the perception that dividend-paying stocks are a good investment in today's market. "The nice thing about dividends is that they demonstrate quality of earnings," said Kenneth Broad, who manages funds worth $1.2 billion for TransAmerica Investment Management in San Francisco. "Companies that monkey around with pro forma numbers are not ones that you usually see paying a dividend," said Broad, whose Premier Growth Opportunity Fund has gained more than 14 percent this year. Investors have warmed up to dividend-paying companies in 2004. Shares of companies in the Standard & Poor's 500 that pay dividends have gained more than 14 percent so far this year, about twice the 7.2 percent gain for the overall index. That's a switch from 2003, when dividend-paying stocks underperformed the market by a wide margin. "In 2003, you had a rising tide lifting all boats," while this year has seen a market that has divided into winners and losers, according to Broad. "A dividend is usually a sign of a company with good underlying fundamentals," he said. This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com.

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