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Does Microsoft’s Dividend Bump, Buyback Make the Stock a Buy?

Microsoft stock is trying to hit all-time highs after boosting its dividend and initiating a $60 billion buyback. Here's the plan.

Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report shares are pushing higher on Wednesday, up about 1% but fading from the highs as the market struggles for traction.

Shares were up almost 2% earlier in the day but have since slipped a bit. That said, the news is still bullish and Microsoft stock is just a hair off its all-time high.

On Tuesday after the close, Microsoft announced an 11% bump to its dividend and approved a new buyback program up to $60 billion.

Of course, that still leaves Microsoft’s dividend yield at a paltry 0.83%, while its $60 billion buyback program will only make a small impact given that its market cap is north of $2.25 trillion.

However, I think investors will find the stock’s one-, three- and five-year gains of 47%, 166% and 437%, respectively, more attractive than a few dividend percentage points.

With shares hovering near the highs, let’s look at the charts.

Trading Microsoft Stock

Daily chart of Microsoft stock.

Daily chart of Microsoft stock.

In August, Microsoft stock ripped higher, giving us a bullish engulfing candle and sending the stock to all-time highs.

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Since then though, the stock has struggled on rallies back to $305, with this level acting as resistance.

The recent dip — which came alongside a five-day skid in the Nasdaq Composite — sent Microsoft below the 10-day and 21-day moving averages. However, it didn’t quite make it to the 50-day.

Perhaps it would have without today’s news. In any regard, shares have gapped back above the 10-day and 21-day moving averages, but continue to struggle with the $305 level.

That leaves bulls in a frustrating but clear situation.

How the Long Tech Rally Evolved

On the downside, Microsoft has to hold the $300 level, along with the 10-day and 21-day moving averages. Below puts the recent low in play, near $294.

On the upside, watch $305. A push over $305 and the 161.8% extension is on the table, near $313. Above that and bulls can use an intermediate target of $325, which brings the 261.8% extension into play. 

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