Microsoft shares rally as Morgan Stanley “cautiously estimates” 10% dividend hike soon

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Microsoft Corp. shares rose on Tuesday to counter the sell-off in the broader stock market, as the software giant is expected to announce another dividend hike as early as this week.

The MSFT share,
-0.31%
rose 0.9% to close at $ 299.79 and was the DJIA’s top performer on the Dow Jones Industrial Average,
-0.31%
Components. The Dow Jones lost 292 points, or 0.8%.

Over the past 11 years, Microsoft announced an increase in its quarterly dividend in mid-September, with all announcements made between September 15 and September 21.

Morgan Stanley analyst Keith Weiss pointed out that over the past few years the percentage of dividend increase has hovered around the “high single digit / low double digit range” regardless of the growth. of operating profit.

So even though Microsoft reported operating profit growth of 32.0% in the 12 months to June 30 at the end of July, Weiss said it “conservatively estimates” an increase of around 10%. quarterly dividend from 56 cents per share to 62 cents per share.

That said, given another year in which operating profit rose more than 20%, Weiss said he sees “the capacity for a larger dividend increase.”

If the dividend is raised to 62 cents per share, the new annual dividend rate would imply a dividend yield of 0.83%, based on the closing share price on Tuesday. This would be lower than the implied return of the S&P 500 SPX index,
-0.35%
1.35%, according to FactSet, but higher than the return of the SPDR Technology Sector Select Sector XLK index fund,
-0.41%
0.69%.

Of the five U.S. companies with market capitalizations over $ 1,000 billion, Microsoft’s is the highest, such as Apple Inc.’s AAPL,
+ 0.25%
the current dividend yield is 0.59%, while Alphabet Inc. GOOGL,
-0.08%

GOOG,
-0.07%,
Amazon.com Inc. AMZN,
+ 2.50%
and Facebook Inc. FB,
-0.96%
do not pay a dividend.

Meanwhile, Microsoft’s dividend yield has tended to decline for nearly the past decade and fell to its lowest level in 17 years, with the pace of increases lagging behind the pace of increases in the price of stocks, especially recently.

FactSet, MarketWatch


The stock has grown an average of 37.5% in each of the past five years, including this year, and has climbed an average of 28.6% over the past 10 years, while the dividend increase has averaged 9.2% over the past five years and 13.5% in the past 10.

Microsoft’s stock, which was only 1.6% below the record high of $ 304.65 on August 23, 2021, has climbed 43.6% in the past 12 months, while the tech ETF SPDR rose 34.4% and the Dow Jones climbed 23.5% in the past year. .


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