Shareholders of both Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) are likely pleased with the performance they've achieved over the last 12 months. Both stocks have skyrocketed. Microsoft shares are up 58% and Apple is up a staggering 106%.

While the bullish run for these stocks has been great for investors, it's changed the game for their attractiveness as dividend stocks. Both companies' dividend yields (dividend payments per share as a percentage of the stock price) have fallen sharply. Nevertheless, both stocks remain compelling bets for dividend investors. But which is the better buy?

Here's a look at how each of these stocks compare on three key characteristics for dividend stocks.

A chart showing a stock price moving higher

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Dividend yield

Apple has the lower dividend yield of the two companies. The tech giant announced a 5% dividend increase last April. The company's quarterly dividend currently amounts to $0.77, or $3.08 annually. This gives Apple stock a 1% dividend yield.

Microsoft increased its dividend by 11% in September, bringing the quarterly payout to $0.51. This translates to $2.04 annually, giving the software giant a dividend yield of 1.3% -- meaningfully ahead of Apple's.

It's worth noting that both Apple and Microsoft have dividend yields below the average dividend yield of 1.8% for stocks in the S&P 500. But despite their unimpressive dividend yields, the two stocks make up for lacking in this characteristic by scoring well on the next two factors: payout ratio and dividend growth potential.

Payout ratio

Apple is currently paying out just 25% of its earnings, leaving significant wiggle room for the dividend if earnings take a hit for an unexpected reason in the coming years. The strength of Apple's dividend is also evident by looking at dividend payments as a percentage of free cash flow.

Of Apple's $58.9 billion in trailing-12-month free cash, the tech giant paid out just $14.1 billion (24%) in dividends.

Microsoft also scores well when it comes to the financial strength of its dividend, but its payout ratio is slightly higher at 35%. The company is also paying out $14.1 billion annually in dividends -- but it's doing that on a $38.6 billion in free cash flow compared to Apple's $58.9 billion.

Dividend growth potential

Finally, investors should consider dividend growth potential. To compare the two companies' dividend growth prospects, investors should consider a combination of earnings growth momentum and earnings growth prospects.

Over the past three years, Apple has been able to compound its earnings-per-share growth by an average rate of 12.7% annually. But Microsoft's EPS has risen at an average rate of 22.8%. In addition, analysts are more bullish on Microsoft's earnings growth prospects over the next five years. On average, analysts expect Microsoft's earnings per share to increase by 14.5% annually during the next five years. Comparatively, investors expect Apple's earnings per share to increase by 10.5% annually over this same timeframe. 

Given Microsoft's strong earnings growth momentum and analysts' more optimistic view for future earnings growth, the software company appears to have greater dividend growth potential than Apple.

What's the verdict?

Despite scoring worse than Apple when it comes to payout ratio, Microsoft has a meaningfully higher dividend yield and better earnings growth potential, making it the more attractive dividend stock overall. Further, though Microsoft may score worse than Apple on payout ratio, a 35% payout ratio is still very conservative -- leaving significant breathing room for the dividend.

Of course, investors shouldn't rule out Apple as a great option for investors looking for a stable, growing stream of income. Though Microsoft may appear to be the better dividend stock today, Apple stock is still attractive in its own right.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.