That rising tide includes some old boats. For instance, there’s Microsoft (MSFT - Get Report). The company’s new CEO, Satya Nadella, has been in the news since replacing Steve Ballmer, tasked with turning the software developer giant into a growth company once again.
Shares, at $44.50, are up 19% for the year to date.
Read More: Amazon Fire Phone Review: That's All Ya Got?Microsoft has a history of making its dividend payments, as this chart shows. The company has been a very impressive cash generator and is well known for giving good returns to its shareholders. Currently, Microsoft's dividend yield is around 2.8% and dividends have increased by 16.4% over the past five years on average. Payout Ratio The payout ratio of a company can determine whether or not it is actually paying dividends from profits being earned or if dividends are a false indicator of growth in the company. A payout ratio below 100 means that the company is easily paying the dividends from its earnings; a payout ratio of over 100% indicates a company is paying out dividends more than what its net income is. To determine the sustainability of dividends, it is crucial to analyze the payout ratio. A relatively higher payout ratio indicates higher chances of the stock not being sustainable. Microsoft currently has a payout ratio of around 38%, which indicates that the stock is highly sustainable. It is currently paying its dividends from what it is earning and its dividends actually represent growth in the company. R&D For a tech firm, research and development is of crucial importance. Microsoft's transition to cloud-based offerings ensures the company is trying to remain among the leaders in the sector and that growth prospects seem favorable. Read More: Facebook's Blowout Earnings Are Even More Impressive Than You Thought Such situations create a sense of confidence in the company's performance and suggest that returns to shareholders will be sustained by the company since they would be a continuum of growth in the company.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts