Microsoft Corporation Is an Undervalued Dividend Stock

Microsoft certainly isn't the darling of the Street it once was. But there is still value to be had.

Mar 22, 2014 at 11:30AM

Microsoft (NASDAQ:MSFT) certainly isn't the darling of the Street it once was. But even without robust bottom-line growth rates, investors can still get their bang for their buck from Bill Gate's baby.

Microsoft's value lies in its cash flow. The company is a cash cow, turning about $0.27 of every dollar into free cash flow. Further, without ample opportunity for reinvestment of ever dollar it earns, Microsoft pays out a good chunk of earnings to shareholders. The result is about a 2.9% dividend yield at today's price for Microsoft shares -- a far better rate than investors will find in their savings account. Of course, income investors get the added benefit that the stock price itself can appreciate, too.

In the video below, Fool contributor Daniel Sparks take a closer look at Microsoft as a dividend stock.

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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