Credit: Shutterstock photoD ividend leaderMicrosoft ( MSFT ) is expected to post accelerating earnings growth this fiscal year and next as it rolls out new products designed for a cloud-based world.
Profit for the current fiscal year ending in June is expected to rise 3% to $2.75 a share after edging up less than 1% in fiscal 2015. Profit growth for fiscal 2017 is seen picking up further, to 13%.
Microsoft is transitioning to what it calls a "mobile-first, cloud-first world" as consumers increasingly log onto the Internet from a wide range of devices and businesses seek to cut costs by storing data in off-site servers.
Revenue from Microsoft's Azure cloud business more than doubled in the latest quarter from the same period a year earlier as the tech giant seeks to compete against rivalsAmazon.com ( AMZN ),Alphabet ( GOOGL ) andOracle ( ORCL ).
Microsoft also recently introduced a slew of devices connected through its new Windows 10 operating system, such as the Surface Pro 4 tablet, Lumia phones, Xbox One game consoles and a new version of its Microsoft Band fitness-tracking device.
Microsoft's shares are up more than 20% this year, while the S&P 500 is roughly flat. The stock jumped 10% on Oct. 23 after a better-than-expected quarterly earnings report that was fueled by growth in cloud services, server products and subscriptions to Microsoft's Office 365 business software. That helped mitigate a decline in phone sales and weak revenue from Windows.
Deutsche Bank on Dec. 16 increased its price target on Microsoft to 65 from 55, due in part to a successful transition to the cloud. It expects Microsoft to get a boost from higher prices for some versions of a new Windows Server operating system expected in 2016.
On Dec. 10, Microsoft boosted its quarterly dividend by 16% to 36 cents a share, which works out to an annual dividend of $1.44 a share. The annualized dividend yield is 2.6%, higher than the S&P 500 average of about 2%. Microsoft has increased the payout for five straight years. The long-term dividend growth rate is 19%.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
