Microsoft (MSFT) has raised its dividend every year since 2010, and there is widespread expectation that the tech giant will repeat this in 2018 as well. Adding to the speculations, brokerage firm Morgan Stanley on Wednesday predicted a dividend hike next month, following which investors sent the stock up to an all-time high of $111.95 during the regular trading session.
The firm said there is a high chance of Microsoft increasing its dividend as tax-law changes have freed $130 billion worth of cash offshore. A 20% growth in EBIT in fiscal 2018 is also likely to contribute to the chances of a dividend hike.
The company has consistently raised its dividend by 3 to 5 cents every year. The dividend has increased 223% from 13 cents in 2010 to the current 42 cents. At the current rate of 42 cents per share for a quarter, the forward annual dividend rate stood at $1.68 with a yield of 1.55%.
The dividends paid out to shareholders in proportion of earnings or cash flow, termed as payout ratio, stood at 77.46%, according to Morningstar.
Meanwhile, Motley Fool states that Microsoft has plenty of room for a dividend hike as it has a low payout ratio of just 43%. These predictions have helped the stock touch a new lifetime high, though many traders continue to remain cautious.
During the recently completed fourth-quarter, Microsoft said it has paid $3.2 billion as dividends and has repurchased about $2.3 billion worth of stocks. The company’s free cash flow has fallen 15% to $7.4 billion.
The Redmond, Washington-based company’s stock has risen more than 53% in the past one year and over 30% year-to-date.