Balancing Dividends and Fundamentals: The Case of NASDAQ:MSFT.

Last update: Oct 2, 2024

Our stock screener has spotted MICROSOFT CORP (NASDAQ:MSFT) as a good dividend stock with solid fundamentals. NASDAQ:MSFT shows decent health and profitability. At the same time it gives a good and sustainable dividend. We'll dive into each aspect below.

What does the Dividend looks like for NASDAQ:MSFT

ChartMill employs its own Dividend Rating system for all stocks. This score, on a scale of 0 to 10, is determined by evaluating different dividend factors, such as yield, historical performance, dividend growth, and sustainability. NASDAQ:MSFT has been assigned a 7 for dividend:

MSFT's Dividend Yield is rather good when compared to the industry average which is at 10.19. MSFT pays more dividend than 92.53% of the companies in the same industry.
On average, the dividend of MSFT grows each year by 10.19%, which is quite nice.
MSFT has been paying a dividend for at least 10 years, so it has a reliable track record.
MSFT has not decreased their dividend for at least 10 years, which is a reliable track record.
24.70% 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.

Looking at the Health

ChartMill assigns a Health Rating to every stock. This score ranges from 0 to 10 and evaluates the different health aspects like liquidity and solvency, both absolutely, but also relative to the industry peers. NASDAQ:MSFT scores a 8 out of 10:

MSFT has an Altman-Z score of 9.44. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
MSFT has a Altman-Z score of 9.44. This is amongst the best in the industry. MSFT outperforms 83.27% of its industry peers.
MSFT has a debt to FCF ratio of 1.06. This is a very positive value and a sign of high solvency as it would only need 1.06 years to pay back of all of its debts.
MSFT's Debt to FCF ratio of 1.06 is fine compared to the rest of the industry. MSFT outperforms 73.67% of its industry peers.
A Debt/Equity ratio of 0.28 indicates that MSFT is not too dependend on debt financing.
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.

Understanding NASDAQ:MSFT's Profitability

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NASDAQ:MSFT, the assigned 8 is a significant indicator of profitability:

With an excellent Return On Assets value of 17.21%, MSFT belongs to the best of the industry, outperforming 95.37% of the companies in the same industry.
With an excellent Return On Equity value of 32.83%, MSFT belongs to the best of the industry, outperforming 92.88% of the companies in the same industry.
The Return On Invested Capital of MSFT (22.63%) is better than 96.80% of its industry peers.
The Average Return On Invested Capital over the past 3 years for MSFT is significantly above the industry average of 10.22%.
MSFT has a better Profit Margin (35.96%) than 95.73% of its industry peers.
In the last couple of years the Profit Margin of MSFT has grown nicely.
MSFT has a Operating Margin of 44.64%. This is amongst the best in the industry. MSFT outperforms 100.00% of its industry peers.
In the last couple of years the Operating Margin of MSFT has grown nicely.

Every day, new Best Dividend stocks can be found on ChartMill in our Best Dividend screener.

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.