Why the dividend investor may take a look at NASDAQ:MSFT.

Last update: Jul 9, 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.

Unpacking NASDAQ:MSFT's Dividend Rating

ChartMill assigns a proprietary Dividend Rating to each stock. The score is computed by evaluating various valuation aspects, like the yield, the history, the dividend growth and sustainability. NASDAQ:MSFT was assigned a score of 7 for dividend:

MSFT's Dividend Yield is rather good when compared to the industry average which is at 8.28. MSFT pays more dividend than 92.73% 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.
The dividend of MSFT is growing, but earnings are growing more, so the dividend growth is sustainable.

Health Assessment of NASDAQ:MSFT

Every stock is evaluated by ChartMill, receiving a Health Rating on a scale of 0 to 10. This assessment considers different health aspects, including liquidity and solvency, both in absolute terms and relative to industry peers. NASDAQ:MSFT has achieved a 8 out of 10:

MSFT has an Altman-Z score of 10.74. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
The Altman-Z score of MSFT (10.74) is better than 85.82% of its industry peers.
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.
MSFT has a Debt to FCF ratio of 1.25. This is in the better half of the industry: MSFT outperforms 72.00% of its industry peers.
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.
MSFT does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Exploring NASDAQ:MSFT's Profitability

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NASDAQ:MSFT, the assigned 8 is noteworthy for profitability:

MSFT has a better Return On Assets (17.80%) than 95.64% of its industry peers.
Looking at the Return On Equity, with a value of 34.04%, MSFT belongs to the top of the industry, outperforming 95.27% of the companies in the same industry.
The Return On Invested Capital of MSFT (22.99%) is better than 97.82% of its industry peers.
The Average Return On Invested Capital over the past 3 years for MSFT is significantly above the industry average of 9.99%.
MSFT's Profit Margin of 36.43% is amongst the best of the industry. MSFT outperforms 96.73% of its industry peers.
MSFT's Profit Margin has improved in the last couple of years.
MSFT's Operating Margin of 44.70% is amongst the best of the industry. MSFT outperforms 100.00% of its industry peers.
MSFT's Operating Margin has improved in the last couple of years.

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Check the latest full fundamental report of MSFT for a complete fundamental analysis.

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.