What happened

Shares of Microsoft (NASDAQ:MSFT) climbed 4.3% on Wednesday, after analysts raised the specter of an imminent dividend increase.

So what

Morgan Stanley analyst Keith Weiss reiterated his "overweight" rating on Microsoft's stock and boosted his price forecast from $230 to $245. Weiss expects the tech giant to raise its dividend by 10% later in September. He also noted that Microsoft can afford to increase its cash payout to investors even more, thanks to its strong profit growth. 

Rolled dollar bills are rising in stair-step manner.

Microsoft's shareholders may have larger cash dividends headed their way. Image source: Getty Images.

Despite its massive $1.6 trillion market valuation, Microsoft's sales and profits continue to expand at a brisk pace. The tech titan's revenue and operating income leapt 14% and 23%, respectively, to $143 billion and $53 billion, in fiscal 2020, which ended on June 30. 

Now what

Microsoft offers investors a powerful wealth-building formula of surprisingly strong growth and bountiful capital returns. Its fortress-like balance sheet and tremendous cash generation -- to the tune of over $60 billion in operating cash flow in the past year alone  -- allows Microsoft to reinvest in promising growth initiatives, such as cloud computing and artificial intelligence, even as it rewards its shareholders with dividends and stock repurchases. In these ways, Microsoft gives its investors many ways to win.

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.