Press "Enter" to skip to content

Microsoft Offers High-Growth Dividend Stock


The expertise sector has all the time been the place traders go to for progress shares. High-growth firms like Amazon.com (AMZN), Alphabet (GOOG), Netflix (NFLX), and plenty of extra have generated spectacular returns to shareholders over the previous a number of years, by rising share costs.

But the tech sector will also be a superb supply of dividend progress shares. In the previous a number of years, many tech firms have prioritized paying dividends to shareholders, and offering excessive charges of dividend will increase every year.

Microsoft (MSFT) is a high-growth tech inventory, and is a core holding of many institutional traders akin to Melvin Capital, a registered funding advisor managing over $13 billion in property. While Microsoft has a comparatively low dividend yield of 1%, it makes up for this with fast dividend will increase, which makes it an interesting inventory for traders in search of a mixture of yield and progress.

Business Overview and Recent Events

Microsoft is a software program big with a market capitalization of $1.5 trillion. It is among the largest firms on this planet, and affords a various platform of services and products. Its core providing is its Windows working system and associated Office software program. But it additionally has a sizeable gaming division below the Xbox model, along with its LinkedIn subsidiary in addition to its Surface {hardware} section.

Despite the acute financial uncertainty as a result of coronavirus pandemic, Microsoft continues to generate progress even in a tough local weather. The firm just lately reported its monetary outcomes for the fiscal fourth quarter and full yr. Revenue of $38 billion for the quarter elevated 13% from the identical quarter final yr, and beat analyst estimates by $1.48 billion. Meanwhile, adjusted earnings-per-share got here to $1.46, additionally beating expectations by $0.09 per share. Adjusted EPS elevated 7% from the identical quarter a yr in the past.

Among the corporate’s core segments, income in More Personal Computing elevated 16% in fixed forex to $12.9 billion. Revenue in Productivity and Business Processes elevated 8% to $11.Eight billion. Elsewhere, Xbox income elevated by 68%, Surface income elevated 30%, and LinkedIn income elevated 11% for the quarter.

Microsoft has loads of future progress left to ship, thanks largely to its booming cloud companies.

Compelling Dividend Growth Potential

Microsoft has been a rewarding dividend progress inventory over the previous a number of years. The firm has elevated its dividend by roughly 15% per yr over the previous 10 years. This has coincided with Microsoft’s fast gross sales and earnings progress up to now decade. Because the corporate continues to be registering spectacular progress, shareholders can count on continued dividend progress within the years forward. Rising earnings over time is among the key elements separating high quality dividend progress stocks versus bonds and different mounted earnings investments.

Future earnings and dividend progress are extraordinarily doubtless, as the corporate is benefiting from a significant pattern, which is cloud computing. Cloud-based software program choices are reporting glorious progress, akin to Office 365 which reported 22% progress in industrial gross sales. Revenue in Intelligent Cloud rose 19% in constant-currency to $13.Four billion.

Dynamics section income elevated 15% for the quarter, pushed by 40% progress in cloud-based Dynamics 365. Finally, server merchandise and cloud companies elevated 21% as a result of 50% progress in Azure income.

Microsoft has a 1% yield, which is beneath the S&P 500 Index common. But it makes up for this with a excessive fee of dividend progress. If the corporate continues to extend its dividend by 15% per yr, shareholders shopping for at a 1% beginning yield will generate a “yield on cost” of greater than 4% in 10 years from now. As a end result, dividend progress traders will nonetheless see rather a lot to love about Microsoft inventory.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps particular person traders construct top quality dividend progress inventory portfolios for the long term.

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *