Microsoft (MSFT) fell out of favor with many investors during the past several years, with flashy competitors like Apple (AAPL) and Google (GOOG) cashing in on the mobile revolution while MSFT was left behind.

However, thanks to a good run for MSFT stock lately and a new management approach, Microsoft has gotten some swagger back.

That alone makes MSFT stock worth a look.

But while some folks might just be looking to swing trade the upwards momentum, a patient investor looking for income in retirement could actually be served quite well by buying Microsoft stock at current levels and hanging on to it for years to come.

MSFT as a Retirement Investment

The long-term power of Microsoft comes from its commitment to shareholders, returning tons of capital via dividends and buybacks.

• Dividends: At 2.6%, Microsoft’s dividend yield right now is greater than the current rate for 10-year Treasuries. Furthermore, the payouts of 28 cents per quarter annualize to just about 40% of fiscal 2015 earnings forecasts. That means plenty of wiggle-room for MSFT dividend increases even if earnings per share don’t move higher — which they will.
• Buybacks: In September 2013, the company announced another $40 billion in Microsoft stock buybacks. That’s on top of a whopping $110 billion in stock buybacks at MSFT over the past 10 years, according to calculations by Morgan Housel at the Motley Fool. That has reduced Microsoft stock outstanding to around 8.24 billion shares currently from almost 10.87 billion shares in summer 2004. That’s a reduction of about 25% in MSFT stock over the last decade.
• Ready Cash: For fiscal 2014, Microsoft’s operating cash flow totaled $28.8 billion — leaving plenty of room to deliver all that capital back to shareholders, and then some. Throw in $85.7 in cash and short-term investments, and Microsoft has plenty of ammunition for future dividends and buybacks.

Why Buy Microsoft Stock Now?

Microsoft stock has big long-term potential, but MSFT also has a big tailwind that makes it a buy right now. Shares are up about 35% in the past year, almost three times the return of the S&P 500 Index in the same period.

The reason is optimism over a corporate restructuring that has involved a new CEO, a reorganization of Microsoft operating divisions and even a downsizing that will cut 18,000 jobs.

All this has added to optimism around Microsoft, hinting at a different company with brighter days ahead.

Skeptics will point out beyond the recent pop in share prices, MSFT stock hasn’t really gone anywhere in the past decade. But that criticism is a bit overdone; Microsoft stock actually has recorded 110% in total returns in the past 10 years vs. 117% for the S&P 500 in the same period.

Even after this run, too, MSFT stock enjoys a forward price-to-earnings ratio of about 13.5 based on FY2015 forecasts. That’s significantly lower than the 16.2 forward P/E for the S&P 500.

This seems to indicate that Microsoft stock is fairly valued right now. And even if it stumbles a bit in its reorganization, MSFT stock has a juicy dividend and stable operations that will serve it well over the long-term.

Retirement investors should believe in Microsoft stock as a dividend machine that will be delivering income for years to come. And at current levels, MSFT is a great buy even after its recent run-up.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.