Why Microsoft Corporations’s Dividend Payments Could Double Within 5 Years (MSFT)

Changes in the cloud continue to benefit MSFT and its shareholders

The technology sector isn’t known for paying out juicy dividends. Companies from the high-growth sector tend to re invest their cash into expanding instead of returning it to investors.

Why Microsoft Corporations's Dividend Payments Could Double Within 5 Years (MSFT)However, 17 years after the dot-com bubble popped in March of 2000, a group of former tech highflyers is quietly evolving into some of the best dividend payers in the S&P 500.

Apple, Inc. (NASDAQ: AAPL) is a great example. Apple began paying a dividend in 2012, and now offers a 1.6% yield after growing its dividend by 27% in the last three years.

With more than $200 billion in cash, I expect Apple to continue growing its dividend for years to come.

While those stats are impressive, another legendary tech stock offers a better dividend yield and growth. This global leader pays out a 2.4% yield, a 50% premium to Apple’s 1.6% yield. It has grown its dividend by 44% in the last three years, a 63% premium to Apple.

And finally, with just over $100 billion in cash on its balance sheet, I am expecting its dividend payment to grow more than 100% in the next five years.

The company, Microsoft Corporation (NASDAQ:MSFT) is one of the greatest growth stocks in the history of the Nasdaq. Since going public in 1986, shares are up more than 66,420%.

That means $1,000 invested back then would now be worth $6.6 million today. Take a look at the impressive run below.

MSFT dividend

If you missed out on those gains, don’t worry. Today, there’s a new way to cash in on the company — MSFT dividends.

Microsoft Has Reliably Paid A Quarterly Dividend Since 2007

Microsoft made its first ever dividend payment back in February of 2007, just over ten years ago. At the time, it was big news. It was somewhat unusual for big technology companies to initiate a dividend.

The first MSFT dividend came in at just $0.10. Since then, its payment has grown to 40 cents per share, close to a 300% increase in 10 years. Take a look below.

MSFT dividend

That has Microsoft’s 5-year dividend growth rate clocking in at 17.7%, a rate that beats 67% of its industry peers.

That’s already an impressive start to a dividend program. It’s clear Microsoft is committed to rewarding investors with big-time dividend growth. But this is just the tip of the iceberg. Looking forward, I am expecting Microsoft’s dividend to grow more than 100% in the next five years.

Here’s why.

While Microsoft’s days of mega growth are behind it, the company is scoring big wins in the high-growth cloud computing market. According to market research firm IDC, worldwide spending on cloud services is expected to more than double by 2020 to $195 billion.

Right now, Microsoft is the second-largest player in the industry, trailing only Amazon.com, Inc. (NASDAQ:AMZN). However, that is set to change. Microsoft is in position to eclipse Amazon and claim the number-one market position.

A recent Morgan Stanley survey of CIOs found the group would be more likely to use Microsoft Azure compared to Amazon Web Services in the next three years. In light of this shift. Microsoft should have no problem delivering record revenue and earnings for years to come.

That is going to have a big impact on the company’s already eye-popping balance sheet. Microsoft currently has more than $100 billion in cash on its balance sheet. That is a lot more capital than Microsoft could invest in growth even if it wanted to.

My prediction is that Microsoft will use its massive and growing cash position to reward investors with big-time dividend growth — doubling its dividend within the next five years.

And despite the strong outlook, Microsoft doesn’t look overvalued. Its P/E ratio of 21 is a small premium to the S&P 500’s 18.

Risks To Consider: Microsoft is banking on capturing a larger share of the high-growth cloud computing market. It needs to deliver on that goal to keep revenue growing and investors happy.

Action To Take: Microsoft is quietly evolving into one of the S&P 500’s best dividend stocks. Buy now and look for the MSFT dividend to grow by at least 100% in the next five years.

Editor’s Note: Everyone knows that Social Security is in bad shape. But most people don’t realize just how desperate the situation is… to fix Social Security benefits have to be cut by 22% immediately. Or payroll taxes have to jump by 32%. So you’re facing pain whether you’re working OR retired. But there’s a way out. A program that can pay you $43,543 per year for the rest of your life. And it has nothing to do with the government. Check it out here.

StreetAuthority’s mission is to help individual investors earn above-average profits by providing a source of independent, unbiased — and most of all, profitable — investing ideas. Unlike traditional publishers, StreetAuthority doesn’t simply regurgitate the latest stock market news. Instead, we provide in-depth research, plus specific investment ideas and immediate action to take based on the latest market events. Visit us at StreetAuthority.com.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/msft-dividend-payments-could-double-within-5-years/.

©2019 InvestorPlace Media, LLC