Whether you know it or not, there’s a good chance you own some Microsoft shares, since so many mutual funds have it. Congratulations, then. Microsoft said Tuesday it wants to send you $3 a share in special dividends.

Assuming the company’s shareholders approve the plan in November, the Dec. 2 payout will be the biggest special dividend in history – $32 billion. (To get it, you’ll have to own the stock on the “record date,” Nov. 17.)

The company also wants to double its ordinary dividend, to 32 cents a share – putting an additional $3.5 billion in shareholders’ pockets. And it wants to spend about $30 billion over four years to buy back shares. That should boost earnings for each of the shares left in stockholders hands, helping nudge the price up.

Wow!

The news certainly caught investors’ attention, driving Microsoft shares up about 3 percent Wednesday.

But let’s not go overboard: Even if you own thousands of Microsoft shares, the dividend won’t make you any richer.

Indeed, tax on the dividend could leave you with LESS than you started with.

OK, I’m raining on the parade, but here’s how it works:

When a company pays a dividend, cash moves from the company’s pockets to the shareholders’. That would seem to make shareholders richer.

Unfortunately, it also makes the company poorer. All else being equal, the stock price falls to reflect the reduction in cash. A $3-per-share dividend payment makes the stock price fall by $3 a share.

Shareholders have more cash, but their stock is worth less. So really, it’s a wash.

Moreover, investors who hold the shares in taxable accounts will face tax on dividends – 15 percent for most people. That will be owed for the 2004 tax year.

If there were no dividend, there’d be no tax – not at that point, at least. An investor would face a tax – a 15 percent capital gains tax – only after selling shares at a profit.

By hanging on to the shares, the investor could postpone that tax for years, even decades. Or forever, since there’s no capital gains tax on investments that pass to heirs upon the investor’s death.

This is why companies have paid such stingy dividends in recent years. Their shareholders would rather get their gains through rising stock prices. So instead of paying dividends, or boosting them, companies spend extra cash on research or expansion that ought to increase profits and push share prices up.

Aside from tax bills, the special dividend payment will create another problem for Microsoft shareholders. They’ll have to decide what to do with that money.

Keep it as cash? Spend it? Use it to buy more Microsoft shares? Invest it in something else?

It will be a tough decision.

If shareholders spent the entire $32 billion dividend, the economy might well benefit from the stimulus. But shareholders who intend to hold Microsoft for the long term will probably refrain from spending the money, especially if they see those shares drop in price when the dividend is paid.

Investors who hold Microsoft through mutual funds may not even realize they’re getting this dividend. First, it will be mingled with all the other dividends earned by the fund and not reported separately. Second, most investors have dividends automatically reinvested.

And, of course, many investors who own Microsoft in retirement accounts such as 401(k)s and IRAs can’t spend the dividend without triggering a 10 percent early-withdrawal penalty.

So my bet is that most of the special dividend will be reinvested, in Microsoft or other stocks. While any gush of cash can help boost stock prices, $32 billion isn’t much, given that total value of U.S. stocks exceeds $12 trillion.

Is there nothing to get excited about in the Microsoft announcement?

Certainly, it draws attention to the fact that Microsoft is a cash cow. Perhaps that interest will drive the stock’s price up, as it did Wednesday.

Still, the days of stupendous gains seem long over for Microsoft. The stock has been languishing since hitting its peak of nearly $60 in December 1999. Yesterday, it closed at $28.86, up 54 cents.

Despite that jump, Microsoft’s return has trailed the Standard & Poor’s 500 index by about 2 percentage points since the start of July 2003.

Investment pros often see a special dividend as a bad sign, indicating the company can’t think of anything better to do with its cash, such as invest in research or expansion.

But Microsoft is a special case, since it has such an extraordinary reserve – $60 billion. Even after paying the special dividend, it will have plenty to spend on new business opportunities, if it can find them.

So the special dividend isn’t bad news for Microsoft shareholders. But it’s not particularly good news, either.

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(Jeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownjphillynews.com.)

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