Why NASDAQ:MSFT provides a good dividend, while having solid fundamentals.

Our stock screening tool has identified MICROSOFT CORP (NASDAQ:MSFT) as a strong dividend contender with robust fundamentals. NASDAQ:MSFT exhibits commendable financial health and profitability, all while offering a sustainable dividend. Let's delve into each aspect below.

Dividend Examination for NASDAQ:MSFT

ChartMill employs its own Dividend Rating system for all stocks. This score, on a scale of 0 to 10, is determined by evaluating different dividend factors, such as yield, historical performance, dividend growth, and sustainability. NASDAQ:MSFT has been assigned a 7 for dividend:

• Compared to an average industry Dividend Yield of 11.46, MSFT pays a better dividend. On top of this MSFT pays more dividend than 91.73% of the companies listed in the same industry.
• The dividend of MSFT is nicely growing with an annual growth rate of 10.00%!
• MSFT has paid a dividend for at least 10 years, which is a reliable track record.
• MSFT has not decreased their dividend for at least 10 years, which is a reliable track record.
• MSFT pays out 25.12% of its income as dividend. This is a sustainable payout ratio.
• The dividend of MSFT is growing, but earnings are growing more, so the dividend growth is sustainable.

Analyzing Health Metrics

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:MSFT, the assigned 8 reflects its health status:

• MSFT has an Altman-Z score of 9.92. This indicates that MSFT is financially healthy and has little risk of bankruptcy at the moment.
• The Altman-Z score of MSFT (9.92) is better than 85.97% of its industry peers.
• The Debt to FCF ratio of MSFT is 1.40, which is an excellent value as it means it would take MSFT, only 1.40 years of fcf income to pay off all of its debts.
• The Debt to FCF ratio of MSFT (1.40) is better than 75.18% of its industry peers.
• MSFT has a Debt/Equity ratio of 0.38. This is a healthy value indicating a solid balance between debt and equity.
• Although MSFT does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
• MSFT does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Looking at the Profitability

ChartMill utilizes a Profitability Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of profitability ratios and margins, both in absolute terms and in comparison to industry peers. NASDAQ:MSFT has earned a 8 out of 10:

• The Return On Assets of MSFT (17.54%) is better than 97.48% of its industry peers.
• The Return On Equity of MSFT (34.64%) is better than 95.68% of its industry peers.
• The Return On Invested Capital of MSFT (22.41%) is better than 97.48% of its industry peers.
• The Average Return On Invested Capital over the past 3 years for MSFT is significantly above the industry average of 10.11%.
• MSFT has a Profit Margin of 36.27%. This is amongst the best in the industry. MSFT outperforms 97.12% of its industry peers.
• In the last couple of years the Profit Margin of MSFT has grown nicely.
• The Operating Margin of MSFT (44.17%) is better than 100.00% of its industry peers.
• In the last couple of years the Operating Margin of MSFT has grown nicely.

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For an up to date full fundamental analysis you can check the fundamental report of MSFT

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.