Our analysis is based on comparing Microsoft Corp. with the following peers – Oracle Corporation, International Business Machines Corporation, Alphabet Inc. Class A, HP Inc., Cisco Systems, Inc., Apple Inc., CA, Inc., SAP SE Sponsored ADR, Red Hat, Inc. and Yahoo! Inc. (ORCL-US, IBM-US, GOOGL-US, HPQ-US, CSCO-US, AAPL-US, CA-US, SAP-US, RHT-US and YHOO-US).
Microsoft Corp.’s dividend yield is 2.26 percent and its dividend payout is 67.70 percent. This compares to a peer median dividend yield of 1.53 percent and a payout level of 28.57 percent. This type of dividend performance might make it a good stock for dividend investors. In addition, the company’s relatively good dividend quality score of 75 out of a possible score of 100 points to some sustainability of its robust payout ratio, and underscores its attractiveness for dividend investors seeking current income.
Dividend Quality Overview
- Over the last twelve months (prior to March 31, 2017), MSFT-US paid a medium quality dividend, which represents a yield of 2.26% at the current price.
- Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years — of these 2 were high quality and 3 were medium quality.
- The ending cash balance, with a dividend coverage of 10.81x, provides a substantial cushion in case of a significant reduction of cash flows in the future.
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Over the last twelve months (prior to March 31, 2017), MSFT-US paid a medium quality dividend.
The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 3.17x), investing cash flow (coverage of -4.25x), issuance cash flow (coverage of 2.04x) and twelve-month prior cash (coverage of 9.05x), for a total dividend coverage of 11.81x.
MSFT-US‘s issuance cash flow includes outflows from net share buybacks (coverage of -1.11x). Thus, the total coverage including share buybacks is 12.92x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.
These coverage ratio factors imply that the firm’s net cash inflow from issuance was required (in addition to operating and investment cash) to pay the dividend, which suggests a medium dividend quality.
|Dividend Yield (%)||2.49||2.59||2.58||2.79||2.75||2.26|
|Dividend Payout (%)||40||35.66||42.59||83.78||68.57||67.7|
A complete list of metrics and analysis is available on the company page.
Microsoft Corp. engages in the provision of developing and marketing software and hardware services. Its products include operating systems for computing devices, servers, phones and intelligent devices. It also offers server applications for distributed computing environments, productivity applications, business solution applications, desktop and server management tools, software development tools, video games, and online advertising. It operates through the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and cloud services in portfolio of productivity, communication, and information services. It comprises of office commercial, office consumer, and microsoft dynamics business solutions. The Intelligent Cloud segment offers hybrid server products and cloud services. It comprises of server products and cloud services and enterprise services. The More Personal Computing segment comprises of windows, devices, gaming, and search advertising. The company was founded by William Henry Gates III in 1975 and is headquartered in Redmond, WA.
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