Microsoft stock dividend payout options

Effective January 1, 2016, no new purchases of Microsoft stock are permitted in the 401(k) Plan. Participants that held Microsoft stock as part of their account prior to this change were able to retain those holdings and the associated dividends can continue to be reinvested.

The Dividend Payout feature, for those who have an existing balance in Microsoft stock, allows you to reinvest your cash dividends and purchase more Microsoft stock, or receive those dividends in cash. Reinvested dividends are the only way additional Microsoft stock can be purchased within the Plan.

Dividends reinvested in the Plan are tax deferred until you take a withdrawal or distribution. Dividends taken in cash from the Plan are taxable income to you in the year in which they are paid.

Before you make your dividend election, review the following information about your dividend payment options. It is important to understand the tax and investment implications of your decision.

Unless you specify otherwise, your dividend will be paid directly to you. The cash dividend payment is subject to applicable federal, state, and local income taxes in the year it is paid. It is taxed as ordinary income and does not qualify for favorable "qualified dividend" tax treatment. 

If you receive your dividends in a cash distribution from the Plan, a $5 check handling fee applies. To avoid this fee, you will need to either: 

  • Receive your dividend through Electronic Funds Transfer (EFT) and update your dividend election to select EFT as the payment method; or 

  • Not take a cash distribution and instead elect to have the dividends reinvested under the Plan

If you elect to reinvest your dividends, additional Microsoft stock shares will be purchased on the record date equal to the value of the dividend paid and held in your account at Fidelity.

Dividends that are reinvested in Microsoft stock can add to the growth potential of your Plan's account balance. You defer paying taxes on your dividends (and their earnings) while they are in the Plan.

Reinvested dividends incur a $0.01-cent-per-share trading fee for the purchase of additional shares (capped at $19.95 per transaction). 

To make your dividend election, follow the steps below or call Fidelity at (888) 810-6738. 

  1. Log onto Fidelity NetBenefits. 

  2. On your Microsoft 401(k) Plan account, select Stock Dividend Elections. 

  3. Click 100% Reinvest into Company Stock or 100% transferred electronically to your bank account (as you decide) 

  4. Click Update Dividend Election. 

  5. Confirm your dividend election by clicking Yes. 

  6. If applicable, initiate EFT by going to “Bank/Tax Information” and entering your bank name, account number, and routing number.

For your dividend election to be valid, it must be received by 1:00 PM PT the day before the record date of the most current dividend payment. Between market close the day before the record date and before the anticipated payment date, you are restricted from making any changes to your dividend payout election.

Employees outside the United States may call Fidelity toll-free at IAC + 877-833-9900. You must first obtain an AT&T International Access Code (IAC) to dial the toll-free number. 

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