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Why Microsoft Stock Rose Today

By Joe Tenebruso – Updated Sep 9, 2020 at 8:05PM

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The tech titan could be about to boost its dividend.

What happened

Shares of Microsoft (MSFT 4.69%) 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.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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