NEW YORK (CNN/Money) - Microsoft Corp. said Tuesday it would double its cash dividend and that its board approved a plan to buy back up to $30 billion of the company's stock over the next four years.

The world's largest software maker also announced plans for a special one-time payout of $3 a share. All told, Microsoft said it would be returning $75 billion in cash to shareholders over the next four years.

As a result of the increase in the regular dividend, from an annual payment of 16 cents a share to four quarterly payments of 8 cents a share, Microsoft's stock will yield about 1.1 percent.

The Redmond, Wash.-based company began paying a dividend in March, 2003 and this marks the second time that the company has doubled it. But even with the latest increase, Microsoft's yield will be below the 1.7 percent average yield for the S&P 500.

The dividend increase is scheduled to take effect on September 14.

Microsoft (MSFT: Research, Estimates) stock jumped more than 5 percent in after-hours trading after rising more than 1 percent during the regular session. Investors typically applaud companies for buying back stock since repurchases reduce the number of shares outstanding, thereby boosting earnings per share.

Jeff Van Harte, manager of the Transamerica Premier Equity fund, which owns Microsoft, said that the buyback should probably boost estimated earnings growth by a couple of percentage points.

But Microsoft's new plan should reward all shareholders, most notably co-founder and Chairman Bill Gates and Chief Executive Officer Steve Ballmer, handsomely in other ways.

Based on the most recent regulatory filings, Gates owned about 1.12 billion shares, which means he would receive nearly $3.4 billion from the one-time dividend alone. Gates announced Tuesday that he would donate his proceeds from the special dividend to the Bill & Melinda Gates Foundation, the charitable organization named for the Microsoft chairman and his wife.

Will Microsoft's stock continue to climb higher now that it announced what it will do with its cash?

Gates would also get paid about $360 million a year as a result of the increase in the regular dividend. Ballmer, who owns about 411 million shares, stands to gain $1.2 billion from the special dividend and would receive $132 million a year under the increased regular dividend.

However, because Microsoft will be paying $3 worth of cash to all shareholders in the form of a special dividend, the company warned that it expects its stock price to drop by $3 once the special dividend is issued, which is expected to take place on December 2, pending shareholder approval.

Microsoft, which has been under pressure from shareholders to do something with its $56 billion cash hoard, provided further details in a conference call after the closing bell Tuesday.

Ballmer said during the call that now was a good time for Microsoft to give back cash to shareholders since the company has settled many outstanding antitrust-related lawsuits, including those with the federal government and several states as well as rivals Sun Microsystems and AOL (which, like CNN/Money, is owned by Time Warner).

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"We are very happy to be in this position to return almost $75 billion in capital to investors over four years," said Ballmer during the call. "We're also pleased to be able to say that we put many of our legal issues in the rear view mirror so to speak, which affords us the opportunity to move forward with the cash management plan."

Ballmer added, however, that Microsoft, which currently has no debt, does not have any interest in borrowing money to buy back even more stock.

Also during the call, Gates and CFO John Connors stressed the company would continue to spend heavily on research and development. Connors added that the company has not ruled out strategic investments or acquisitions either.

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Transamerica's Van Harte said he was pleased that Microsoft was able to prove to Wall Street that it could give back a significant chunk of cash to shareholders while still investing for the future.

"Just because the company is increasing the dividend and buying back shares does not mean it's not a growth company anymore. They're doing the right thing for shareholders."

Investors and analysts on Wall Street had long fantasized about all the ways that Microsoft might spend its cash horde.

Connors told investors in February that the company would outline plans for much of its cash by the end of July.

And with that date drawing near, Microsoft stock has finally started to show signs of emerging from a nearly two-year-long funk.

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Drake Johnstone, an analyst with Davenport & Co, said he thinks Microsoft will build on that momentum since it's finally putting the cash issue to rest. He adds that investors can now focus solely on the company's fundamentals. Microsoft will report its fiscal fourth-quarter results after the closing bell Thursday.

In addition, Johnstone said Microsoft's bold decision could force other tech leaders to follow suit. (Johnstone doesn't own the stock and his firm has no banking ties with Microsoft.)

"Microsoft's move may place pressure on other tech companies with large cash positions to start paying a dividend or increasing it," Johnstone said, singling out Intel and Cisco Systems as two examples.

Intel, which has $14.3 billion in cash, currently pays a dividend that yields 0.7 percent. Cisco, with $8.9 billion in cash, does not pay a dividend.

For some more imaginative, but perhaps less lucrative ways that Microsoft might have put its cash to use, click here.