Microsoft Hikes Dividend, Announces $60 Billion Stock Buyback

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.

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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."

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