We Believe One Of The World's Largest Companies Will Increase Their DividendSep 14, 2021
Over the last decade, Microsoft has increased their dividend by roughly 13% every year on average. These increases are often announced in mid-September. With that date approaching, we believe that Microsoft will increase their dividend yet again and MSFT will continue to remain a top-notch dividend stock.
We're forecasting for their dividend yield to increase to over .8%. When pairing this dividend growth, with EPS growth & margin growth, we see an attractive entry point for the stock to outperform over the next 6 months.
This entry point is set up nicely as the MSFT stock recently hit our projected price target!
We therefore are increasing our price target, based off of this continued growth. Let's dive into why we think this will happen, below:
Microsoft Dividend Yield:
As we mentioned above, this time of year is when Microsoft makes these announcements. So why are we so confident they will increase their dividend again?
- While they've been increasing their dividend over the last decade, the dividend yield has actually been declining due to their stock growth (yield is a function of the dividend divided by the current stock price). This is an extremely interesting point to watch as the growth in price has overshadowed the increase in payout. We expect this trend to continue as this has been going on since 2015. With larger dividends and higher prices, Microsoft can give you returns both via income as well as price appreciation!
- Their financial profile is absolutely stellar. While their annual increases in dividends over the years is likely somewhat irrespective of their financial profile, it certainly does not hurt. Having said that, Microsoft just announced another year of over 20% operating growth. This growth should continue for the next several years as they continue scaling out their cloud offering - Azure. This growth allows Microsoft to not only pay out a dividend, but be able to increase it every year too!
We don't think many people are arguing this point but what is important is that this increase in dividend isn't the only good news.
MSFT stock should also increase in stock price by over 15% within the next 6 months.
Let's quickly discuss their biggest growth drivers below.