The catch is that the company’s current dividend is not high compared to other stocks since it used to pay only $0.56. An increase of $0.06 yields an 11% increase and now Microsoft pays $0.62 per share for a forward yield of 0.83%. The company is also conducting a new share repurchase authorization for a maximum of $60 billion in common stock.
Microsoft remains a good addition to a portfolio because of the performance of CEO Satya Nadella and because the company “is always one step ahead, beating both earnings and revenue expectations quarter after quarter like a drum,” wrote Stephen “Sarge”Guifoyle in a recent Real Money Pro Column. “In addition, with little exception, the firm maintains a level of excellence each and every quarter across every one of its business lines.”
Microsoft is more diversified than its competitors because it also sells business software, gaming and evolving labor markets services (LinkedIn). As the company transforms these business units to a recurring revenue (subscription) model from a licensing sales model, it increases its prospects for a higher profit margin, he wrote. He maintains a price target of $328.
Microsoft reports its fiscal first quarter financial performance in October. The Wall Street earnings per share (EPS) estimates are $2.07 on revenue of $44 billion. This would amount to earnings growth of 13.7% and revenue growth of 23.2%.
“One must remember, this is growth off of a pandemic year where demand surged, and the sales growth is actually an acceleration,” Guilfoyle wrote.