Microsoft Corporation (MSFT) develops, licenses, and supports software, services, devices, and solutions worldwide.
Q3 2022 hedge fund letters, conferences and more
The company just raised its quarterly dividend by 9.67% to 68 cents/share on September 20th, 2022. Microsoft has managed to increase annual dividends for 17 consecutive years.
Annual dividends increased from 76 cents/share in 2012 to $2.42/share in 2022. At the new rate, the forward dividend is $2.72/share.
Earnings per share have increased from $2/share in 2012 to $9.65/share in 2022. Microsoft is expected to generate $10.98/share in 2023 and $12.82/share in 2024.
Future growth would be driven by its cloud based platform Azure, as corporations move to the cloud. It would be driven from Office, as more customers move to use software as a service, rather than buy licenses. Linkedin could help growth too, as would Xbox. Windows is essentially a utility, on which a lot of other applications run.
Strategic acquisitions could also boost the bottom line. The company is in the process of acquiring Activision Blizzard.
Earnings per share growth has been aided by share buybacks. Microsoft reduced the number of shares outstanding from 8.506 billion in 2012 to 7.504 billion in 2022.
The dividend payout ratio has moved around over the past decade, but seems reasonable at 25% today. It is possible that Microsoft may decide to grow dividends at a faster rate than earnings over the next decade. At least there is room in the payout ratio.
The stock is not cheap today at 23.65 times forward earnings and a dividend yield of 1.10%. However, I will add to my position, because I believe it can deliver solid yields on cost and good returns over the next decade.
