You may have heard the famous expression that you shouldn't put all of your eggs in one basket. It's why one of the core principles for long-term investing is to diversify your portfolio.
But what if push came to shove and you had to pick just one stock to own?
I'm not sure about you, but I would probably look to check off three boxes. The company must:
- Have many ways to generate revenue.
- Be profitable and share those earnings with investors.
- Possess a long runway for future growth.
Microsoft (MSFT 0.73%) is one of the select few stocks that can check all those boxes. Here is a closer look at why it's the single company I would choose if I had to buy and hold a single stock with my entire portfolio.
Image source: Getty Images
Diversification protects Microsoft in a disruptive tech sector
If you can't diversify your portfolio, at least own a company with multiple ways to generate revenue. Technology companies face constant threats from disruptive newcomers, but Microsoft has consistently demonstrated its ability to evolve and stay relevant.
Legacy products, such as Windows and Microsoft 365 software, continue to print money to this day. Meanwhile, Microsoft has developed and acquired numerous other businesses over time, including:
- Azure: cloud services
- LinkedIn: social media
- Microsoft Teams: communications
- Activision Blizzard and Xbox: video gaming
- GitHub: software development
- Dynamics 365: enterprise software
In addition, Microsoft has a deep relationship and a 27% stake in OpenAI, the leading developer of artificial intelligence (AI) app ChatGPT. With so many businesses, Microsoft has dug deep competitive moats. It has become a key cog in society; few people get through a day without using a Microsoft product or service.
World-class financials offer safety and income
All those moving parts also make Microsoft one of the world's largest companies and a financial powerhouse with deep pockets. The company has generated nearly $300 billion in revenue over the past year, and approximately $78 billion in free cash flow. This is despite spending billions of dollars to build out data centers for AI.
Few companies operate at this level of size and profitability. When a new growth trend emerges, Microsoft can either compete through innovation or make an acquisition. It has taken both avenues over the years.
Investing profits into growing the company is crucial in the tech space, but Microsoft still finds money for share repurchases and dividends. Management has managed to raise the dividend for 23 consecutive years, and the dividend payout ratio is less than a quarter of 2025 earnings per share.
NASDAQ: MSFT
Key Data Points
A fortress-like balance sheet supports all of this. The company has $102 billion in cash on hand, a staggering number that I couldn't help but giggle at as I typed it. Microsoft also boasts an AAA credit rating, one of only two public companies to hold this distinction. That's a higher credit rating than the United States government, which can literally print money.
All said, Microsoft offers a combination of share price appreciation and dividends that's hard to beat.
Compelling growth opportunities ahead
Past results don't guarantee future success, but Microsoft does have bright prospects. The company's various successful businesses pave the way for opportunities in artificial intelligence, which could ultimately prove as monumental for the global economy as the Internet has been.
Microsoft is integrating AI into its products and services. AI has also become a growth catalyst for Azure, as it operates primarily through the cloud, just like most other modern software.
Admittedly, the company is so large that it could become difficult to sustain growth. That said, Microsoft still has pretty healthy growth expectations. Analysts estimate the company will grow earnings at an annualized rate of 13.5% over the long term.
That won't make you rich overnight, but it's plenty to do it slowly, with a dividend and share price that inches higher as the years go by. No stock is the best at everything. But when you're looking for one stock you can trust with so much of your hard-earned money, no company represents the total package quite like Microsoft.
