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Cramer: Microsoft's dividend is a move of desperation

Tuesday, 17 Sep 2013 | 10:23 AM ET
Cramer: Is Microsoft's new dividend necessary?
Tuesday, 17 Sep 2013 | 9:03 AM ET
CNBC's Jim Cramer reacts to news that the software company is returning more cash to shareholders.

Microsoft's new dividend hike may be a desperate move by a company that has better strategic options, CNBC's Jim Cramer said Tuesday.

Microsoft announced a more than 20 percent increase in its dividend Tuesday and disclosed plans for a new $40 billion buyback. The quarterly dividend was raised to 28 cents per share, a 5 cent boost over the previous quarter. The dividend will be payable to shareholders on Dec. 12.

(Read more: Microsoft boosts dividend by 22%, sets $40 billion buyback)

"The dividend boost is substantial. You already have a nice dividend," Cramer said on "Squawk on the Street."

"[Microsoft CEO Steve] Ballmer just wants this stock higher so bad ... by any means necessary. ... I think that Ballmer doesn't want his legacy to be a $33 stock."

"Microsoft, as opposed to Apple, is doing everything. It's just that some of it isn't working so well," he added.

Cramer said that the move by Microsoft is a "quandary" and feels like a move of desperation from a company that "doesn't need to be desperate." Some speculation on why the move was made is that Capital Research, one of Microsoft's largest shareholders, was unhappy with the recent performance of the company.

"If the Cap Re guys are unhappy, then you did wrong. Plain and simple," he explained. "If they're unhappy, you respond to them."

Cramer's solution for the company, which he has been talking about for weeks, is to split it up to create value for shareholders.

(Read more: Cramer: 'It's time to break up Microsoft')

When asked whether the Microsoft dividend hike could be the first of several similar moves by large-cap companies into the fourth quarter, Cramer said, "I think you've got to" expect it.

He added that many firms are trying to do whatever they can to keep their stock price up, pointing specifically to companies in the pharmaceutical, chemical and commodity sectors.

(More investing: Big demand for small-cap stocks)

"These companies are not stopping. ... These companies are saying 'we are mad as hell about our stock price and we're not going to take it anymore,' " he said, and the result is dividend increases, acquisitions and strategic partnerships.

Jim Cramer's charitable trust owns shares of Apple.

—By CNBC's Paul Toscano. Follow him on Twitter @ToscanoPaul and get the latest stories from "Squawk on the Street."

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