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Microsoft (Nasdaq: MSFT) investors received a double dose of positive news on Tuesday morning, as the technology giant disclosed both a dividend increase and a new share repurchase program. These announcements and the market’s generally optimistic mood sent Microsoft stock nearly 2% higher in early-session trading.

At the same time, Microsoft remains a bellwether tech company that can move markets and put investors in a good or bad mood.

Suffice it to say, the mood was mostly good on Tuesday morning and Microsoft stock buyers were in the driver’s seat. It’s hard to blame them for celebrating two pieces of positive news as they bolster the bull case for Microsoft’s long-term shareholders.

Microsoft continues pattern of dividend hikes

Microsoft has a good track record of once-per-year dividend increases. For the past four quarters, the company paid a dividend of $0.75 per quarter, which would equate to $3 per year. Now, Microsoft is sweetening the deal even more for shareholders with another dividend raise.

Specifically, Microsoft hiked its next quarterly dividend distribution by $0.08 per share or 10% when compared to the previous payout. So now, Microsoft expects to pay $0.83 per share in quarterly dividends, which would translate to $3.32 per share on an annualized basis.

To put this into perspective, let’s say Microsoft stock trades at $438. Then, Microsoft’s forward annual dividend yield would be $3.32 / $438, or 0.76%.

Granted, that’s not a gigantic yield, as the technology sector’s average forward annual dividend yield is around 1%. Still, Microsoft’s cash distributions are a nice bonus, and shareholders of record on November 21 will get a quarterly payout from Microsoft at the new, higher rate.

Microsoft returns value to shareholders through buybacks

Dividends aren’t the only way for a company to return value to its shareholders. Another way is through share buybacks. Microsoft wasn’t previously known for enacting share repurchase programs, but that’s about to change.

In particular, Microsoft just announced a new program authorizing up to $60 billion worth of share repurchases. Be advised, however, that Microsoft could terminate this program at any time.

Still, it’s probably a good sign that Microsoft’s board of directors approved this program. After all, share buybacks suggest that a company is confident in its future stock-price appreciation prospects.

In addition, Microsoft has an opportunity to shrink the number of its outstanding shares through share repurchases. This could reduce the circulating supply of Microsoft stock shares and possibly put upward pressure on the share price. Plus, this might have the effect of increasing Microsoft’s earnings per share (EPS).

Small steps can have big implications

Microsoft’s dividend hike isn’t massive by any means. Also, Microsoft’s share repurchases are expected to amount to less than 2% of the company’s market capitalization.

Yet, bigger isn’t always better. Perhaps Microsoft wants to focus its capital resources on research and development, for example, rather than on paying huge dividends. Moreover, Microsoft may just be testing the waters with this share buyback program in anticipation of a potential program expansion.

With Tuesday’s announcements, Microsoft might be on the path to bigger and better things. If you’re bullish about Microsoft and want to take advantage of the higher dividend payouts, consider purchasing shares prior to November 21.

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