This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Carnevale: Microsoft Too Cheap to Ignore

By Chuck Carnevale

NEW YORK (F.A.S.T. Graphs) -- With the major stock market indices approaching record levels, finding good value is becoming more difficult every day. However, there are major sectors that the markets are currently leaving behind. One glaring example is the blue-chip, dividend paying technology sector.

It was not very long ago when adjectives such as, blue-chip or dividend paying, simply did not apply to high-profile technology companies. But that is changing, and I believe the way we look at high-profile technology stocks must change with it. Enter Microsoft (MSFT).

This stalwart is a classic example of a once high-flying and hyper-growing technology company that now appears to be morphing into a blue-chip, high-yielding dividend growth stock. Therefore, I believe investors should consider adjusting their views about Microsoft the business, and Microsoft the stock. Let's evaluate the stock and the business, through the lens of F.A.S.T. Graphs, a fundamentals analyzer.

Since 1999, Microsoft has been a losing investment based on capital appreciation. Only the initiation of its first dividend in 2003, and its rapid growth, plus a special dividend of $3 per share in calendar year 2005, have enabled shareholders to just barely break even. Regardless, Microsoft the stock can only be described as a lousy investment since 1999. Consequently, attitudes about Microsoft the business are mostly and understandably poor and/or negative.

Microsoft's poor stock-price performance has masked its exceptional business performance over the same time period. Moreover, I believe Microsoft's operating record demonstrates that CEO Steve Ballmer has been unfairly criticized as a result of Microsoft's poor stock performance. It's important to recognize that the CEO of a publicly traded company should be held responsible for the operating results of the business. However, it should also be understood that they do not control Mr. Market. Consequently, they cannot control the price action of their stock in an auction market.

Microsoft's Ugly Performance Record

Look at Microsoft's price and dividend performance since the end of calendar year 1998. From the performance table below, we discover that a $1,000 investment in Microsoft on Dec. 31, 1998 would have fallen to $817.61 by March 5, 2013, generating a compound loss of 1.4% per annum.

Thanks to the cumulative dividend totaling $224.09, shareholders were able to break even. The combined total capital loss plus dividends amount to a total ending value of $1,041.70 on the original $1,000 investment. This computes to a .03% total annualized rate of return vs. a 2.8% annualized total rate of return from an equal investment in the S&P 500. Clearly Microsoft's stock has been dead money for the better part of a decade and a half.



1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs