Stocks opened sharply lower Wednesday as investors parsed an onslaught of corporate earnings updates.
Quarterly results from Microsoft (MSFT, -0.6%) drew the most attention, as it is the first of the big tech giants on the earnings calendar. Late Tuesday, the software maker reported top- and bottom-line beats for the final three months of 2022, which initially sent MSFT stock higher in after-hours trading. However, a closer look at the company's guidance sent shares – and the broader market – lower in today's trading.
Taking a closer look at the numbers, Microsoft recorded earnings of $2.32 per share in its fiscal second quarter, down 6.5% year-over-year. Revenue of $52.8 billion was up 2% from the year-ago period, though this marked the slowest sales growth since June 2016. Additionally, Azure cloud revenue grew 31% year-over-year.
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"It's no secret that Cloud is front and center for the company right now [and] Azure beat on growth expectations," says David Wagner, portfolio manager at Aptus Capital Advisors. "Everyone knows that growth is slowing in Azure. Investors just want to see that it is slowing less than anticipated. And that's exactly what happened this quarter."
However, in the company's earnings call with analysts, Chief Financial Officer Amy Hood said MSFT expects moderating "business trends that we saw at the end of December" to have likely continued in its fiscal third quarter as corporate spending slows.
"The celebration that Microsoft received from the market ended as the company's CFO delivered her words of caution," says Quincy Krosby, chief global strategist for LPL Financial. "It has been said so many times that corporate guidance during this fourth-quarter earnings season is crucial for understanding the direction of the market, especially amid a backdrop of weakening economic data."
And for today, that direction was mostly lower. While stocks finished well off their lows, the Nasdaq Composite ended the day down 0.2% at 11,313, and the S&P 500 was off 0.02% at 4,016. The Dow Jones Industrial Average, however, managed to eke out a marginal gain to 33,743.
The Newest Dividend Aristocrats
It was a big day for devout followers of the Dividend Aristocrats – an illustrious group of S&P 500 components that have raised their dividends every year for at least the last 25 straight. The Standard & Poor's annual rebalancing of the S&P 500 Dividend Aristocrats resulted in three new members, effective prior to the Feb. 1 market open, including well-known consumer staples stock J.M. Smucker (SJM).
While this announcement is certainly welcome news for income seekers, investors of all stripes should be focused on dividend-paying names – especially in today's volatile market. "Dividend income, an important element of total return, is often overlooked amid gyrations in the stock market," say John Eade, president and director of Portfolio Strategies, and Jim Kelleher, director of Research at Argus. And dividend-growth stocks, in particular, "tend to hold their value better in periods of rising rates and deliver solid total returns in all markets." With that in mind, here are the best dividend stocks investors can count on for dividend growth.
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