Microsoft shares soar as Morgan Stanley ‘conservatively’ estimates 10% dividend hike soon

The shares of Microsoft Corp. rose Tuesday to fend off the sell-off in the broader stock market as the software giant is expected to announce another dividend hike this week.

The stock MSFT,
+0.94%
rose 0.9% in afternoon trading and was the top performer of the only two of the 30 components of the Dow Jones Industrial Average DJIA,
-0.84%
who gained ground. Meanwhile, the Dow fell 308 points, or 0.9%.

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

Morgan Stanley analyst Keith Weiss pointed out that in recent years, the percentage increase in dividends has fluctuated around the “high single digit/low double digit range,” regardless of operating income growth.

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

That said, given another year in which operating income grew more than 20%, Weiss said he sees “capacity for a bigger dividend hike.”

If the dividend is increased to 62 cents per share, the new annual dividend rate would imply a dividend yield of 0.83%, based on current stock prices. That would be lower than the implied return for the S&P 500 index SPX,
-0.57%
of 1.36%, according to FactSet, but above the return for exchange-traded fund SPDR Technology Sector Select Sector XLK,
-0.13%
from 0.69%.

Of the five U.S. companies with market caps over $1 trillion, Microsoft’s is the highest, as is Apple Inc.’s AAPL.
-0.96%
current dividend yield is 0.60%, while Alphabet Inc. GOOGL,
+0.15%

GOOG,
-0.04%,
Amazon.com Inc. AMZN,
-0.21%
and Facebook Inc. fb,
+0.01%
do not pay a dividend.

Meanwhile, Microsoft’s dividend yield has been on a declining trend for nearly the past decade, falling to its lowest level in 17 years as the rate of increase has lagged the pace of stock price gains, especially recently.

FactSet, MarketWatch

The stock has increased by an average of 37.5% over the past five years, including this year, and has increased by an average of 28.6% over the past 10 years, while the dividend has increased by an average of 9.2% and 13.5% over the past five years. the past five years. past 10.

Shares of Microsoft, which were just 1.6% below the August 23, 2021 record of $304.65, are up 45.9% in the past 12 months, while the ETF with SPDR technology is up 35.6% and the Dow is up 23.5% over the past year.

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