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

Last update: Dec 6, 2024

Our stock screening tool has identified MICROSOFT CORP (NASDAQ:MSFT) as a strong dividend contender with robust fundamentals. NASDAQ:MSFT exhibits commendable financial health and profitability, all while offering a sustainable dividend. Let's delve into each aspect below.

Evaluating Dividend: 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:

Compared to an average industry Dividend Yield of 11.61, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.45% of the companies listed in the same industry.
On average, the dividend of MSFT grows each year by 10.19%, 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.
24.63% 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.

Deciphering NASDAQ:MSFT's Health Rating

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NASDAQ:MSFT, the assigned 8 for health provides valuable insights:

An Altman-Z score of 10.18 indicates that MSFT is not in any danger for bankruptcy at the moment.
The Altman-Z score of MSFT (10.18) is better than 80.58% of its industry peers.
MSFT has a debt to FCF ratio of 1.05. This is a very positive value and a sign of high solvency as it would only need 1.05 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 1.05, MSFT is doing good in the industry, outperforming 73.02% of the companies in the same industry.
MSFT has a Debt/Equity ratio of 0.25. 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.

Looking at the 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:

With an excellent Return On Assets value of 17.31%, MSFT belongs to the best of the industry, outperforming 94.24% of the companies in the same industry.
The Return On Equity of MSFT (31.46%) is better than 92.09% of its industry peers.
MSFT has a better Return On Invested Capital (22.57%) than 94.60% of its industry peers.
MSFT had an Average Return On Invested Capital over the past 3 years of 23.84%. This is significantly above the industry average of 12.36%.
MSFT has a Profit Margin of 35.61%. This is amongst the best in the industry. MSFT outperforms 96.40% of its industry peers.
MSFT's Profit Margin has improved in the last couple of years.
With an excellent Operating Margin value of 44.49%, MSFT belongs to the best of the industry, outperforming 99.64% of the companies in the same industry.
MSFT's Operating Margin has improved in the last couple of years.

More Best Dividend stocks can be found in our Best Dividend screener.

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

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.