When the dust from the 2016 election finally cleared, a surprising number of companies blasted northbound. Microsoft Corporation (NASDAQ:MSFT) was initially not one of them, although it’s not hard to see why. American industrial icons like Caterpillar Inc. (NYSE:CAT) are benefactors of obvious tailwinds. While MSFT stock is no less a representation of domestic prosperity, it does have substantial international exposure. Overplaying the patriotism angle could lead to unwanted risks for Microsoft stock.
But now, the markets at least have accepted the inevitability of a Donald Trump presidency.
After going volatile, the benchmark exchange-traded fund Technology SPDR (ETF) (NYSEARCA:XLK) is up almost 4% since election day. MSFT stock — which at the low point suffered a 4% loss following the Trump victory — is also up 4%. With key rival Apple Inc. (NASDAQ:AAPL) finally finding traction in light of recent events, tech is looking solid heading into year’s end.
Naturally, that bodes well for Microsoft stock. However, there are a number of factors that make MSFT stock a cut above the competition.
Smart Moves by MSFT Stock
For starters, the tech giant cleared a major legal hurdle toward its planned acquisition of LinkedIn Corp (NYSE:LNKD). Although the $26 billion deal was approved by regulators in the U.S., Canada, Brazil and South Africa, the European market was a different story. Salesforce.com, Inc. (NYSE:CRM) — once a rival bidder for LNKD — raised a stink with regional officials, claiming antitrust worries.
MSFT smartly offered concessions to close the deal with European regulators. Under the terms of the agreement, “Microsoft must provide competing professional networking sites access to Office programs and can’t force computer manufacturers to install the LinkedIn shortcut on desktops under the agreement,” per the Puget Sound Business Journal.
Once the ink dries, MSFT stock will be buoyed by the biggest acquisition in its history. More importantly, it diversifies the company’s business structure. A cursory look at the financials for Intel Corporation (NASDAQ:INTC) proves that no tech firm can rely on hardware alone. If Microsoft stock wants to be relevant in the new century, it has to be aggressive with cloud computing. The LNKD deal does exactly that.
But that doesn’t mean MSFT stock has to give up on its core products. While personal computers in its traditional platform are a dying market, the house of Bill Gates offered an ingenious rethink with “Surface.” The notebook-tablet hybrid is raking in billions, and the latest iteration, “Surface Book,” is likely to be another crowd pleaser.
Microsoft stock investors should also add the company’s marketing team to their Christmas card list. The partnership with the National Football League allows MSFT to showcase its latest innovations through the country’s most popular sport. As an added bonus, the “Surface Pro” is featured on Electronic Arts Inc.’s (NASDAQ:EA) Madden video game series.
Turning News Into Profits for Microsoft Stock
What this translates to is a company that has proven it can find its way out of any troubled situation. After a rough start to the current decade — MSFT stock averaged a dreadful drop of 3% in its annual return between 2010 and 2012 — management can breathe a little easier.
In the three years since January 2013, Microsoft stock is averaging returns of 30%. Should momentum keep pace, the company will experience another double-digit year. That will be the first time MSFT stock hit four consecutive years of double-digit growth since the tech boom of the mid to late 1990s.
The wealth of great business decisions allows management to reward Microsoft stock investors in ways other than just capital growth. For example, the MSFT dividend yield is currently pegged at 2.6%, which is significantly higher than its industry average.
Additionally, the growth rate of the MSFT dividend gives it a clear advantage over the competition. If someone is looking for passive income with a little pizzazz, there are not too many options similar to Microsoft stock.
Of course, no company is without fault. For MSFT stock, the number one detractor is that it no longer has that fresh appeal that makes tech names so exciting — and so ballistic. Yes, double-digit gains are good, but triple-digit gains are even better. Furthermore, there’s a noticeable decline of oomph in the upside trek of Microsoft stock.
By no means is that a red flag — no asset can keep running on max throttle indefinitely. But so long as you keep expectations realistic, MSFT stock is a reliable bet.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.