Is NASDAQ:MSFT a Good Fit for Dividend Investing?

Last update: Jun 18, 2024

Consider MICROSOFT CORP (NASDAQ:MSFT) as a top pick for dividend investors, identified by our stock screening tool. NASDAQ:MSFT shines in terms of profitability, solvency, and liquidity, all while paying a decent dividend. Let's dive deeper into the analysis.

How We Gauge Dividend for NASDAQ:MSFT

ChartMill provides a Dividend Rating for every stock, ranging from 0 to 10. This rating assesses various dividend aspects, including yield, growth, and sustainability. NASDAQ:MSFT earns a 7 out of 10:

MSFT's Dividend Yield is rather good when compared to the industry average which is at 7.89. MSFT pays more dividend than 92.34% of the companies in the same industry.
On average, the dividend of MSFT grows each year by 10.00%, which is quite nice.
MSFT has paid a dividend for at least 10 years, which is a reliable track record.
MSFT has not decreased their dividend for at least 10 years, which is a reliable track record.
24.66% of the earnings are spent on dividend by MSFT. This is a low number and sustainable payout ratio.
MSFT's earnings are growing more than its dividend. This makes the dividend growth sustainable.

Understanding NASDAQ:MSFT's Health

A critical element of ChartMill's stock evaluation is the Health Rating, which spans from 0 to 10. This rating considers multiple health factors, including liquidity and solvency, both in absolute terms and relative to industry peers. NASDAQ:MSFT has received a 8 out of 10:

An Altman-Z score of 10.39 indicates that MSFT is not in any danger for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 10.39, MSFT belongs to the top of the industry, outperforming 85.77% of the companies in the same industry.
MSFT has a debt to FCF ratio of 1.25. This is a very positive value and a sign of high solvency as it would only need 1.25 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 1.25, MSFT is doing good in the industry, outperforming 71.53% of the companies in the same industry.
MSFT has a Debt/Equity ratio of 0.33. This is a healthy value indicating a solid balance between debt and equity.
Although MSFT does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
The current and quick ratio evaluation for MSFT is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Profitability Examination for NASDAQ:MSFT

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NASDAQ:MSFT scores a 8 out of 10:

The Return On Assets of MSFT (17.80%) is better than 95.62% of its industry peers.
MSFT has a better Return On Equity (34.04%) than 95.62% of its industry peers.
MSFT has a better Return On Invested Capital (22.99%) than 97.81% of its industry peers.
MSFT had an Average Return On Invested Capital over the past 3 years of 24.79%. This is significantly above the industry average of 9.95%.
The Profit Margin of MSFT (36.43%) is better than 96.72% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
MSFT has a better Operating Margin (44.70%) than 100.00% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.

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For an up to date full fundamental analysis you can check the fundamental report of MSFT

Disclaimer

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.