For those interested in income investing, Microsoft's recent dividend increase may be mighty appealing.
Microsoft (MSFT) is taking a different approach than Apple (AAPL) when it comes to boosting shareholder value. In its September 15 regular quarterly dividend announcement, the company said it would increase its dividend by 16.1 percent, or $0.05 per share. Given the stock’s recent price of $43.87, the stock now yields 3.3 percent.
That means Microsoft now offers a higher yield than several financial institutions in the US. Citigroup Inc. (C) has a dividend of just $0.20 per share, or 0.40 percent, and Bank of America’s (BAC) offers a dividend yield of 1.29 percent.
The dividend increase is a bullish signal. Microsoft’s management is keen on returning its excess cash to its investors. Apple, on the other hand, is issuing more debt once again. On September 10, the company issued a euro bond worth over $2.25 billion. Apple is also buying back shares, but it isn’t raising its dividend—which yielded 1.83 percent recently.
It is clear that Microsoft’s cash flow should support future dividend increases. Sales of its consumer and enterprise software for databases, middleware and cloud, just to name a few, look stable for the next few years.
Written by Chris Lau
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1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $646.35B, most recent closing price at $114.32.
2. Bank of America Corporation (BAC, Earnings, Analysts, Financials): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap at $162.18B, most recent closing price at $15.72.
3. Citigroup Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $148.57B, most recent closing price at $50.12.
4. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $348.92B, most recent closing price at $43.87.
(Monthly return data sourced from Zacks Investment Research. All other data sourced from FINVIZ.)
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