Why Microsoft Stock Rose Today
What happened
Shares of Microsoft (NASDAQ: MSFT) climbed 4.3% on Wednesday, after analysts raised the specter of an imminent dividend increase.
So what
Morgan Stanley analyst Keith Weiss reiterated his "overweight" rating on Microsoft's stock and boosted his price forecast from $230 to $245. Weiss expects the tech giant to raise its dividend by 10% later in September. He also noted that Microsoft can afford to increase its cash payout to investors even more, thanks to its strong profit growth.
Microsoft's shareholders may have larger cash dividends headed their way. Image source: Getty Images.
Despite its massive $1.6 trillion market valuation, Microsoft's sales and profits continue to expand at a brisk pace. The tech titan's revenue and operating income leapt 14% and 23%, respectively, to $143 billion and $53 billion, in fiscal 2020, which ended on June 30.
Now what
Microsoft offers investors a powerful wealth-building formula of surprisingly strong growth and bountiful capital returns. Its fortress-like balance sheet and tremendous cash generation -- to the tune of over $60 billion in operating cash flow in the past year alone -- allows Microsoft to reinvest in promising growth initiatives, such as cloud computing and artificial intelligence, even as it rewards its shareholders with dividends and stock repurchases. In these ways, Microsoft gives its investors many ways to win.
10 stocks we like better than Microsoft
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Microsoft wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 1, 2020
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.
