Why MICROSOFT CORP (NASDAQ:MSFT) provides a good dividend, while having solid fundamentals.

MICROSOFT CORP (NASDAQ:MSFT) is a hidden gem unveiled by our stock screening tool, featuring a promising dividend outlook alongside solid fundamentals. MSFT demonstrates decent financial health and profitability while ensuring a sustainable dividend. Let's break it down further.

Deciphering MSFT's Dividend Rating

To gauge a stock's dividend quality, ChartMill utilizes a Dividend Rating ranging from 0 to 10. This comprehensive assessment considers various dividend aspects, including yield, history, growth, and sustainability. MSFT has achieved a 7 out of 10:

• Compared to an average industry Dividend Yield of 14.48, MSFT pays a better dividend. On top of this MSFT pays more dividend than 92.58% of the companies listed in the same industry.
• On average, the dividend of MSFT grows each year by 10.19%, which is quite nice.
• MSFT has paid a dividend for at least 10 years, which is a reliable track record.
• MSFT has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
• MSFT pays out 24.68% of its income as dividend. This is a sustainable payout ratio.
• MSFT's earnings are growing more than its dividend. This makes the dividend growth sustainable.

What does the Health looks like for MSFT

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For MSFT, the assigned 8 for health provides valuable insights:

• An Altman-Z score of 8.93 indicates that MSFT is not in any danger for bankruptcy at the moment.
• MSFT has a better Altman-Z score (8.93) than 84.81% of its industry peers.
• MSFT has a debt to FCF ratio of 1.16. This is a very positive value and a sign of high solvency as it would only need 1.16 years to pay back of all of its debts.
• MSFT has a better Debt to FCF ratio (1.16) than 71.02% of its industry peers.
• MSFT has a Debt/Equity ratio of 0.24. This is a healthy value indicating a solid balance between debt and equity.
• 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.

Analyzing Profitability Metrics

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. MSFT was assigned a score of 8 for profitability:

• MSFT's Return On Assets of 17.37% is amongst the best of the industry. MSFT outperforms 93.99% of its industry peers.
• The Return On Equity of MSFT (30.64%) is better than 91.17% of its industry peers.
• MSFT has a Return On Invested Capital of 22.54%. This is amongst the best in the industry. MSFT outperforms 96.11% of its industry peers.
• Measured over the past 3 years, the Average Return On Invested Capital for MSFT is significantly above the industry average of 11.25%.
• Looking at the Profit Margin, with a value of 35.43%, MSFT belongs to the top of the industry, outperforming 94.70% of the companies in the same industry.
• MSFT's Profit Margin has improved in the last couple of years.
• MSFT has a better Operating Margin (44.96%) than 98.94% of its industry peers.
• In the last couple of years the Operating Margin of MSFT has grown nicely.

Every day, new Best Dividend stocks can be found on ChartMill in our Best Dividend screener.

Our latest full fundamental report of MSFT contains the most current fundamental analsysis.

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.