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Microsoft Boosts Dividend by 10%

By Joe Tenebruso – Sep 16, 2020 at 12:03PM

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The tech titan is rewarding its investors with larger cash payouts.

Microsoft (MSFT 1.05%) wants to give shareholders more money.

The software giant's board of directors approved a 10% increase to its quarterly dividend to $0.56 per share. That equates to an annualized yield of 1.1%, based on Microsoft's current stock price near $207.

A person in a business suit is holding out $100 bills.

Microsoft's shareholders have more cash headed their way. Image source: Getty Images.

Microsoft is a financial powerhouse. With more than $136 billion in cash and investments and $60 billion in annual operating cash flow, the software giant can easily afford to reward its investors with rapidly growing dividends and bountiful share repurchases, even as it invests heavily in cutting-edge new technologies.

That's important because it allows shareholders to generate a rising and reliable income stream, without the need to sell stock. And it allows Microsoft to stay at the vanguard of technological change.

Microsoft is a leader in areas such as cloud computing and artificial intelligence. Its Azure cloud infrastructure platform is growing at a torrid rate, to the tune of 47% year-over-year growth in the fourth quarter. Microsoft's cloud-based Office 365 software is also enjoying robust growth, with revenue rising 19% in Q4. Its artificial intelligence expertise, meanwhile, helps to strengthen its popular cloud platforms and enable a host of new applications. 

With its cloud businesses fueling its expansion, Microsoft should have little trouble boosting its sales and profits in the coming years. The dividend stalwart is projected to grow its earnings by 15% annually over the next five years, which should allow it to continue to deliver double-digital annual payout increases to its investors.

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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