Microsoft Stock Dividend Analysis: What Investors Should Know

Regardless of any investor’s opinion on the stock of Microsoft
MSFT
, one thing is clear: it doesn’t suffer from lack of name recognition. The stock also pays a dividend, and has since February 2003.

However, a consistent dividend payment may not be enough for investors who are evaluating a stock they do not own, if the dividend yield (the percentage of the value of the stock represented by the dividend payment) is not very high. Let’s take a closer look at MSFT’s dividend, as well as the company’s history of dividend payments and dividend growth.

Does Microsoft Stock Pay Dividends?

MSFT has paid dividends since 2003, beginning with payouts of $0.08 per share and increasing it through the years to a current payout of $0.68 per share each quarter. Alongside the fact that it is a dividend-paying company, Microsoft’s revenue growth has averaged just under 15% over the past five years. Over that same period, its earnings per share (EPS diluted growth) has increased at a 39% annual rate, a remarkable increase for any business, and especially for a company this large and established. During that same five-year time frame, MSFT’s stock price has tripled (up 200%). This has been one of the true stock market leaders in recent years, among dividend stocks, but also among stocks of any type.

Microsoft Stock Dividend Yield

As of September 14, MSFT’s dividend yield (over the past 12 months, a common measure of dividend yield) was 0.81%. That may not represent the major part of a buy thesis for prospective investors in the stocks. By comparison, the S&P 500 yields 1.46% and an ETF that tracks the 80 highest-yielding stocks in the S&P 500
SPYD
yields 4.85%.

That said, MSFT is one of the leading U.S.-based technology companies and the Technology Select Sector SPDR ETF
XLK
, which tracks the S&P 500’s technology sector, of which MSFT is a prominent member, yields 0.79%. So, the stock’s low yield is typical of the tech sector, where companies tend to pay out a relatively low portion of profits, preferring to put those earnings back into the business to continue to grow earnings, and hopefully the stock price with it.

If it’s dividend income you’re looking for, there are other higher yielding stocks that put cash in their investors pockets much more than Microsoft. The Forbes Investment team has identified five of those in Five Dividend Stocks To Beat Inflation, a special report from Forbes’ dividend expert, John Dobosz.

Dividend Payout

Payout ratio is a key factor in evaluating whether a company’s dividend payout is sustainable. If a business pays out all its profits as dividends, that may line shareholders’ pockets for a while, but it leaves very little room for error. MSFT does not have this issue. The company’s payout ratio stands at 28%, which means less than ⅓ of its profits are distributed to shareholders as a dividend. By comparison the other three largest stocks in the U.S. tech sector have varying payout ratios, and all are quite different from MSFT’s. Apple’s payout ratio is 15%, Nvidia’s is only 3% and Broadcom’s
AVGO
stands at 44%,

For MSFT, this paints a solid picture of a company that wants to pay a regular dividend, but recognizes that is not the main attraction to shareholders. Microsoft may be a very mature business, but it is still a growth company.

Dividend Growth

While a high dividend might be a nice headline statistic for investors, companies that grow their dividends are considered to be a 1-2 punch for owning a stock. Companies that grow their dividends year after year likely have the earnings growth to support that.

MSFT has increased its per share dividend payment every year for 18 consecutive years. That consistency and growth in the dividend payment is one of many reasons the company is considered a market leader. Furthermore, it has grown that dividend by 10% annually over the past five years, which is evidence of its commitment to that annual payout. By comparison, Apple
AAPL
has grown its dividend by less than 7%, and Nvidia by only 1%. Broadcom’s dividend has grown by 23% during that time, leaving MSFT again in the middle of three of its tech sector peers.

MSFT Stock Dividend History

As is the case with most U.S. dividend stocks, MSFT pays its dividend quarterly. Its last payment had an ex-date of August 16, which means that an investor needed to own the stock by that date to qualify to receive the dividend. That is also the date when MSFT’s stock price was reduced at the opening of stock market trading, by the amount of the dividend, which was $0.68 for that August payment. The dividend is paid out shortly after the ex-date, and Microsoft paid its shareholders on September 14.

MSFT’s sub-1% dividend yield is in large part due to its stock price growing faster than its willingness to grow its dividend, something that is very common with technology companies. During its history, MSFT’s yield has briefly crossed the 3% level on a few occasions, most recently during 2015. In November 2021, its yield sat all the way down at 0.49%, the lowest rate it has seen since the company started its dividend growth streak 18 years ago.

If it’s dividend income you’re looking for, there are other higher yielding stocks that put cash in their investors pockets much more than Microsoft. The Forbes Investment team has identified five of those in Five Dividend Stocks To Beat Inflation, a special report from Forbes’ dividend expert, John Dobosz.

MSFT Dividend FAQs

Here are answers to some common questions investors may have about MSFT’s dividend:

Is Microsoft’s dividend low?

Yes, compared to the broad stock market (S&P 500) and to many dividend stocks. But MSFT’s yield is similar to that of its sector average, the technology sector.

Only three of the five largest tech stocks by market cap pay dividends and Microsoft has the highest yield: Apple (0.51%), Microsoft (0.94%), Alphabet (none), Amazon (none) and Nvidia (0.04%).

How often does Microsoft pay a dividend?

MSFT pays its dividend quarterly, typically in February, May, August and November.

How many years has Microsoft’s dividend grown?

MSFT has an impressive streak of growing its dividend for 18 consecutive years.

Bottom Line

MSFT has become an iconic company during our lifetime. Bill Gates’ original dream decades ago is now a growth stock leader, technology leader and innovator, and truly global giant. That said, its dividend yield is not the first thing investors might be looking for. But its record of dividend growth and consistency, along with its low dividend payout ratio, represent potential points of stability investors can weigh into their decisions.

If it’s dividend income you’re looking for, there are other higher yielding stocks that put cash in their investors pockets much more than Microsoft. The Forbes Investment team has identified five of those in Five Dividend Stocks To Beat Inflation, a special report from Forbes’ dividend expert, John Dobosz.