When it comes to making savvy investments, it’s all about assessing your risk profile and whether you’re willing to suffer a loss in order to reap the reward. That’s especially true in the tech space where rapid innovation and tough competition constantly weigh on investors’ minds.

However, there are a few tried-and-true tech stocks that are relatively safe bets for traders who are looking to preserve their wealth and bring in a bit of an income. Microsoft Corporation (NASDAQ:MSFT) is one such investment that investors can rely on for steady gains and a solid dividend payment. 

Microsoft stock hasn’t always been considered a safe bet. As the tech space shifted and hardware became an antiquated business, many worried that MSFT was bound to become a bottom feeder. However, CEO Satya Nadella appears to have turned things around at Microsoft by putting the company’s focus firmly on cloud computing and service income. 

Number Two in Cloud

So far, it looks like MSFT is excelling at its newest initiatives. Microsoft’s cloud business, Azure, saw strong growth in the third quarter, and management was upbeat about figure growth prospects in the industry.

Adjusted for currency, Azure enjoyed 89% year-over-year growth putting the company firmly in second place behind Amazon.com, Inc. (NASDAQ:AMZN) as the largest cloud computing provider. 

That’s a big deal growth-wise because it suggests that MSFT has firmly turned the corner away from the cyclical and declining PC business and toward a lucrative industry that is still in its early stages. As more and more companies shift their business to the cloud, Microsoft will be in a strong position to capitalize on the growing market.

Software as a Service

The other thing that MSFT stock is definitely getting right is the firm’s move away from selling its Windows operating system as a single product and instead creating a subscription-based model.

Not only has the company made the necessary changes to make Windows 10 more user-friendly and thus a more popular OS, but the firm has also transitioned its Office products to a subscription service. Those moves have proven successful, and the firm saw its Office 365 commercial revenue grow 40% in Q3. Consumer Office 365 subscribers were also on the rise. 

Returning Value to Shareholders

Another good reason to pick up Microsoft stock is the company’s 1.77% dividend yield. Sure, it’s not a massive payment, but it’s definitely a safe one, and MSFT management has proven to be very shareholder friendly when possible.

While Microsoft doesn’t offer investors the high growth that some of its tech peers do, the company generates a great deal of cash which management uses to return value to shareholders. The company returned $6.8 billion to shareholders during the third quarter, a 37% increase and a good indication that the firm will continue to reward long-term shareholders in the future. 

MSFT Stock Still Has Some Issues

So, while Microsoft’s new direction is certainly working for investors, it still doesn’t make the company a hot buy at its current valuation because I believe its potential is mostly priced in. 

Microsoft still operates its hardware business, which has proven to be relatively cyclical and weighs on the firm’s margins considerably. It’s also important to consider the fact that although Windows has improved, it’s not the only operating system out there.

Not only does MSFT have to contend with competing systems, but the company has to deal with more and more people shifting from using a PC to using a wide variety of devices from mobile phones to wearables. 

Finally, while Azure is definitely the biggest draw for Microsoft stock right now, it’s not a sure bet for the future. Yes, MSFT is killing it right now, but Amazon still has a tight grip on the top spot in the cloud industry, and competitors like Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) are eagerly working to play catch up.

That means Microsoft can’t afford any missteps because it will risk losing valuable market share to the many competitors all poised to pounce at any sign of trouble. 

Bottom Line for Microsoft Stock

MSFT stock is certainly not a bad pick, especially if you’re risk averse or if you might need to cash out in the near future. Of course, there are a lot of other high-growth stocks in the tech space that are likely to deliver better gains than MSFT will, but you’d have to be willing to take on a lot more risk and ride out some turbulence.

The most recent quarterly report suggests that Microsoft stock is on a steady upward trajectory and that dividend payments are safe, making it a great low-risk choice.

As of this writing, Laura Hoy was long AMZN.