Why Microsoft is a Dividend-Growth Investor’s Dream

It’s easy to lose focus of stalwart technology stocks when the market is flying high.

But the market won’t rise forever…

This is why return-hungry investors might find it prudent to secure their portfolios with trusted foundational tech stocks like Microsoft (MSFT) which happens to be quickly emerging as a dividend-growth favorite.

True, MSFT has seen its share of adversity as a vulnerable startup, to monopoly allegations, being viewed as a stalwart, and now a darling of Wall Street as a fast-growing tech stock. MSFT has always come back stronger than before, which is great news for dividend investors.

We’re not even talking share price growth since March, we’re talking tremendous growth for 5+ years. The stock was sitting at $43.50 a share in 2015 and was trading today over $200 a share. That’s over 36% a year. Business, too, is booming. During the pandemic, revenue increased by 13% year over year to $38 billion in the most recent quarter.

A Bit of MSFT Dividend History

Microsoft paid its first dividend in 2003 and made its first increase in 2006, and in 2010 it paid 13 cents a share per quarter and today it pays an amazing 51 cents a share. That’s an annual average growth rate of 14.6%, and the payout ratio currently stands at 34%, most recently it’s been hovering below 40%.

This tech giant is one of two companies that maintains an honorable AAA credit rating and sits on $136 billion in cash, cash equivalents, and short term investments.

Microsoft paid out over $15 billion in dividends in the last 12 months and has enough cash on hand to pay out dividends over 9 years without any additional net income. Their dividends are rock solid.

Your Bottom Line

Microsoft is firing on all cylinders as revenue is up 14%, operating income was up 23%, and earning per share were up 9% in its 4th quarter of 2020.

Business is strong and the work from home environment has generated even more demand for its products. Over the last two years, dividends have increased by 10%, barring any unforeseen catastrophes, it wouldn’t be unreasonable to expect more of the same. Given its current cash position, investors can expect more healthy increases in the years ahead.

The BLI Staff

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