Microsoft Corporation (NASDAQ:MSFT): What You Have To Know Before Buying For The Upcoming Dividend

On the 13 September 2018, Microsoft Corporation (NASDAQ:MSFT) will be paying shareholders an upcoming dividend amount of US$0.42 per share. However, investors must have bought the company’s stock before 15 August 2018 in order to qualify for the payment. That means you have only 2 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Microsoft’s most recent financial data to examine its dividend characteristics in more detail.

View our latest analysis for Microsoft

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is their annual yield among the top 25% of dividend payers?
• Does it consistently pay out dividends without missing a payment of significantly cutting payout?
• Has dividend per share risen in the past couple of years?
• Is its earnings sufficient to payout dividend at the current rate?
• Will the company be able to keep paying dividend based on the future earnings growth?

NasdaqGS:MSFT Historical Dividend Yield August 12th 18

How does Microsoft fare?

Microsoft has a trailing twelve-month payout ratio of 78.06%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 39.68%, leading to a dividend yield of 1.77%. However, EPS should increase to $4.25, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. MSFT has increased its DPS from $0.44 to $1.68 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, Microsoft has a yield of 1.54%, which is high for Software stocks but still below the market’s top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank Microsoft as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for MSFT’s future growth? Take a look at our free research report of analyst consensus for MSFT’s outlook.
2. Valuation: What is MSFT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MSFT is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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