Microsoft (MSFT) knows how to keep long-term investors happy. The tech giant is returning another $60 billion in cash to shareholders through a new stock buyback plan and raised its dividend by more than 10%.
Microsoft's share repurchase program, which has no expiration date, replaces its previous $60 billion authorization announced four years ago. Meanwhile, investors also cheered the news that shareholders of record as of Nov. 21 will receive a quarterly dividend of 83 cents per share, up from the current 75 cents a share.
Microsoft disbursed nearly $22 billion in dividends over the past 12 months and still had levered free cash flow of $56.7 billion. Even better for long-time dividend-growth investors, Microsoft has hiked its payout every year for more than two decades. If it can keep its streak alive, Microsoft will be eligible for inclusion in the S&P 500 Dividend Aristocrats, which are some of the best dividend stocks for reliable and rising payouts.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Please note that although the share repurchase program matches Microsoft's largest-ever authorization, $60 billion represents only about 1.8% of its massive $3.22 trillion market cap.
Shares in Microsoft, the world's second most valuable publicly traded company after Apple (AAPL), were actually lagging the broader market by about 3 percentage points on a price basis for the year-to-date through September 17.
But as a long-term holding, MSFT stock is hard to beat. Indeed, anyone who put $1,000 into Microsoft 20 years ago would be very pleased with their returns today.
Wall Street loves MSFT stock
Wall Street analysts were already plenty bullish on the Magnificent 7 stock before it announced its plans to return more cash to shareholders. Only three Dow Jones stocks garner Strong Buy consensus recommendations, according to data from S&P Global Market Intelligence.
Of the 56 analysts issuing opinions on Microsoft stock, 40 call it a Strong Buy, 14 have it at Buy and two rate it at Hold. Only UnitedHealth Group (UNH) gets a higher rating from industry analysts than MSFT.
Meanwhile, with an average target price of $502, the Street gives MSFT stock implied price upside of 16% over the next 12 months or so.
Analysts' bullishness on Microsoft stems largely from its enviable position in generative artificial intelligence (AI).
As the "leading generative AI enabling provider," Microsoft offers the most "comprehensive end-to-end AI tooling stack and cutting-edge front-end generative AI applications across its entire portfolio of products," notes the software team at Truist Securities, which rates shares at Buy.
"Microsoft is expected to be a leading benefactor of AI workloads across each layer of the generative AI value chain," says Truist. "From increased data storage and high-performance compute to additive workloads across their PaaS portfolio. Additionally, their Copilot products are expected to add fuel to expansions and upsells across their application portfolio."
Related Content
- Analysts' Top S&P 500 Stocks to Buy Now
- Stocks With the Highest Dividend Yields in the S&P 500
- All 30 Dow Jones Stocks Ranked: Buy, Sell or Hold?
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay OffCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Are These the Next Stocks to Split?Interactive Brokers' recently split its stock to makes its shares more accessible to investors. Could these high-priced stocks be next?
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
