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Don’t Dump These Downtrodden Dividend Darlings

An earnings miss isn't the end of the world

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Microsoft NASDAQ:MSFTIn the span of just one week Microsoft (MSFT) went from an announcement focused on a massive reorganization — which was met with some optimism — to announcing its Surface tablet strategy is pretty much a failure. The telltale sign? A nearly $1 billion inventory writeoff on Surface tablets. I’m not sure how many RT tablets we’re talking about, since MSFT lowered the prices on the devices, but that’s just not good. The news, which was incorporated into a revenue and earnings miss for the quarter helped send the shares off a cliff, dropping 11% in one day, shaving lots of money from lots of retirement portfolios. The good news in the report? For the year ended June 30, Microsoft saw both top- and bottom-line year-over-year increases.

Still, the share price drop was enough to weaken the knees … until you look at their financial statements again and realize that keeping its 10-year consecutive year dividend streak alive is truly a walk in the park. Despite the write-down, the company finished up the year with $14 billion more in cash and short-term equivalents than it had a year earlier. The total cash hoard is now $77 billion. Tack on nearly $20 billion in free cash flow, and that 2.89% dividend should get a big bump over the next quarter, the first of many future bumps. Rest easy on this one even as you lick your wounds — MSFT will pay you to hold on for many, many years to come.

Marc Bastow is an Assistant Editor at As of this writing he is long MSFT.

Article printed from InvestorPlace Media,

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