We all know that nothing lasts forever. This concept is especially true in the markets. Even the best companies have their dominant era and then (quite often) fade into the background. However, I’m tempted to make an exception for Microsoft Corporation (NASDAQ:MSFT). With a year-to-date performance exceeding 23%, “boring” Microsoft stock is as good as gold.
My InvestorPlace colleage Bret Kenwell is even more optimistic.
In his view, there’s no point in mincing words as the MSFT stock price will only reach higher ground. Financial services firm Canaccord Genuity recently issued an $86 price target. Some might argue that the forecast is lofty, considering Microsoft stock’s already strong gains over the trailing year. But Kenwell essentially views the target as a matter of when, not if.
We have plenty of reasons to be excited about Microsoft stock — you can take your pick. But from years of writing about the iconic technology firm, I’m most enthused by its new businesses; specifically, the cloud and artificial intelligence.
Adding to the overall bullish story is Canaccord’s contribution. They note that sales figures between the company’s high-growth and low-growth sectors are roughly evenly split. Kenwell clarifies that as the faster-growing divisions increase their allocation, they will have greater leverage in “moving the needle.” That’s a big plus for Microsoft stock as it answers the nagging question: from where will future growth come?
All tech-centric firms have to answer that question. The fact that MSFT has done so, and viably, gives it an edge over competitors like Apple Inc. (NASDAQ:AAPL), Sony Corp (ADR) (NYSE:SNE) and Samsung Electronics (OTCMKTS:SSNLF).
Plenty of Reasons to Believe in the Microsoft Stock Price
I could go on and on about justifying the current Microsoft stock price. One of the key arguments is that Microsoft has turned into a secular investment. Because the company is now a mixture of both dominant stalwart and feisty start-up, its reach is long and broad. MSFT is whatever people want to make of it — a gaming company, a software giant, a cloud-computing provider.
This depth of presence makes MSFT indispensible. Consider that, after decades of attempting to upend PCs, Apple computers still only represent 10% of the user base. Windows operating systems, on the other hand, haul-in approximately 90%. Essentially, if MSFT goes under, it will take the digital world down with it.
That level of dominance allows the company to offer shareholder value that you typically don’t get within the sector. Currently, the Microsoft stock dividend yield is pegged at 2.2%. Although the yield isn’t in AT&T Inc.(NYSE:T) or General Electric Company (NYSE:GE) territory, it’s very reasonable for a consumer tech firm. By comparison, Apple offers 1.62% and Sony a miserly 0.48%.
Furthermore, I argue that the overall investment package eschews passive-income favorites for the Microsoft stock dividend. Again, while the yield isn’t that great, management has been making the right moves and taking smart risks. The end result is a stable organization that largely produces predictable earnings performances and doesn’t spring too many negative surprises.
Given the already-proven track record for MSFT’s next-generation businesses, the Microsoft stock dividend isn’t in any danger of declining. In fact, the payout is increasing, which is something that many “passive-income firms” can’t claim.
Microsoft Stock Is a Healthy, Balanced Investment
Another important reason I believe in the MSFT stock price involves analyst sentiment. Presently, out of a total of 34 covering analysts, 25 are bullish, eight recommend a “hold” and one urges a “sell.” Although the bulls clearly outnumber the bears, a good number of dissenting or cautious voices exist.
The fact that debate occurs over the steadily rising MSFT stock price is a positive development. A healthy market is impossible without a steady stream of buyers and sellers.
I’d be much more concerned about the aforementioned $86 target if no one argued against it. If this were to happen, I’d worry about the sustainability of Microsoft stock.
Until then, you can ride this train knowing that your money is in good hands.
As of this writing, Josh Enomoto is long SNE.