A growing stream of dividend income plus full exposure to the internet economy is a combination that’s hard to pass up but difficult to come by. Yet right now, that’s Microsoft’s (NASDAQ:) sweet spot.
MSFT Weekly 2015-2018
As a rule, if you’re on the hunt to add a stock to your portfolio that will bring steadily increasing income, look for companies that have the financial stability to continually pay dividends while also supporting an attractive yield. This would mean the company has to run a solid business capable of weathering the inevitable stock market cycles.
When evaluated by those metrics, software and hardware giant Microsoft ticks all the boxes. Here’s why we think Microsoft is one of the premier technology stocks for income investors.
Despite many considering Microsoft to be simply a legacy tech company that built its business around its Office software and Windows operating system, the company’s wide economic moat remains intact. And it’s the companies that are able to successfully defend their turf from competition that are also the ones able to deliver uninterrupted dividends.
Microsoft remains the leader in the desktop and laptop operating system market with a commanding 88% market share. Office, which has been transformed into a subscription service for companies that use it, continues to be a powerful driver of earnings. In the last fiscal year, these two units drove 52% of Microsoft’s total sales.
To its credit, even as Microsoft remains successful at protecting Windows and Office—its cash cows—the company has also succeeded at grabbing a major share of additional, new-growth areas within the internet economy. Microsoft’s server and cloud computing division generated $20 billion a year in sales in the latest quarter. Only Amazon (NASDAQ:) beats them in market share within this segment. As well, MIcrosoft’s