Microsoft Corporation (NASDAQ:MSFT) doesn’t make the news headlines quite as much as other tech stocks like Tesla Inc (NASDAQ:TSLA), Amazon.com, Inc. (NASDAQ:AMZN) or Snap Inc (NYSE:SNAP). In fact, its recent headlines relate to some smart privacy moves the company has made, which is the polar opposite of Facebook, Inc. (NASDAQ:FB) at this time.
But looking more broadly, Microsoft is an old-guard tech company — not as sexy as startups or fancy new cars. And yet it has managed to reinvent itself as a cloud player under the leadership of Satya Nadella. MSFT stock has the gains to prove it.
Shares of Microsoft stock are currently worth just under $100. Five years ago, they were worth a third of that price. A year ago, they were worth just under $70. I expect those gains to continue.
Digging it a bit more, the company is slated for 11% annual growth over the next half-decade, and just about all that growth is organic. Earning estimates are expanding for every time period, while Microsoft also has three straight earnings beats in the book.
But earnings growth isn’t the only thing to like about MSFT. The 39-cent dividend it declared in August 2017 has already been bumped up a few pennies. Despite the stock’s upward momentum, its dividend’s forward yield is over 1.7%.
Bottom Line on MSFT Stock
The main concern with Microsoft stock right now is that, while there is a lot to like between the payout and organic expansions, the slow-and-steady upward climb of recent years doesn’t make MSFT the ideal stock to buy right now. Shares are trading for 80 times trailing earnings and 25 times forward earnings.
That’s not to say there isn’t more upside. But if you can get in on a dip, that’s the best bet. Cowen analyst John Blackledge recently upped his Microsoft price target to $112 because the growing demand for cloud computing. More specifically, Blackledge expects a 78% increase in Microsoft Azure’s revenue this year.
Booking 12% gains while collecting a dividend isn’t a deal to scoff at. Microsoft offers investors the best of both worlds with its cloud-centric transformation and sweet quarterly payout as the cherry on top. But gains are almost consolidated. Keep an eye out for an even better entry point.
As of this writing, Robert Martin was long FB.
