Is NASDAQ:MSFT suited for dividend investing?

MICROSOFT CORP (NASDAQ:MSFT) was identified as a stock worth exploring by dividend investors by our stock screener. NASDAQ:MSFT scores well on profitability, solvency and liquidity. At the same time it seems to pay a decent dividend. We'll explore this a bit deeper below.

How do we evaluate the Dividend 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 13.95. MSFT pays more dividend than 91.76% 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 its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
• 24.63% 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 Analysis for 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 7 out of 10:

• An Altman-Z score of 10.09 indicates that MSFT is not in any danger for bankruptcy at the moment.
• MSFT's Altman-Z score of 10.09 is fine compared to the rest of the industry. MSFT outperforms 79.93% 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.
• MSFT's Debt to FCF ratio of 1.05 is fine compared to the rest of the industry. MSFT outperforms 72.76% of its industry peers.
• A Debt/Equity ratio of 0.25 indicates that MSFT is not too dependend on debt financing.
• 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.

Profitability Assessment of NASDAQ:MSFT

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:MSFT was assigned a score of 8 for profitability:

• MSFT has a Return On Assets of 17.31%. This is amongst the best in the industry. MSFT outperforms 93.91% of its industry peers.
• With an excellent Return On Equity value of 31.46%, MSFT belongs to the best of the industry, outperforming 91.76% of the companies in the same industry.
• MSFT has a better Return On Invested Capital (22.57%) than 94.62% of its industry peers.
• The Average Return On Invested Capital over the past 3 years for MSFT is significantly above the industry average of 12.22%.
• MSFT has a Profit Margin of 35.61%. This is amongst the best in the industry. MSFT outperforms 96.42% of its industry peers.
• MSFT's Profit Margin has improved in the last couple of years.
• MSFT has a better Operating Margin (44.49%) than 99.28% 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.

Our latest full fundamental report of MSFT contains the most current fundamental analsysis.

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.