Microsoft raised its quarterly dividend per share by 8% to $0.98, putting its payout well ahead of its Magnificent Seven peers. Strong cloud growth in its latest quarter backs up the higher payment.
Microsoft's payout tops its Magnificent Seven peers
On Sept. 15, Microsoft increased its quarterly dividend per share to $0.98, an 8% raise. That new dividend payment tops the rest of the Magnificent Seven. Meta's quarterly dividend, the next-highest in the group, is a little over half of Microsoft's new payout at $0.525 per share.
Meta and Alphabet have only paid dividends for a few years. Apple has also raised its dividend for over a decade, but Microsoft's growth has been more impressive over that stretch, and Nvidia only recently resumed hikes after years without one.
Microsoft also carries a cash payout ratio of 39.5%, compared with Apple's 15.6%. A lower ratio can leave more room for growth, but Apple's much lower figure instead points to a priority on buybacks rather than dividend increases.
Cloud growth supports the higher payment
Microsoft's fiscal fourth-quarter results, covering the period through June 30, show why the dividend increase looks sustainable. Revenue rose 18% year over year to $90 billion, while non-GAAP earnings per share climbed 23% to $4.74.
Cloud demand drove much of that growth. Microsoft Cloud revenue reached $59.3 billion, up 27% year over year, and the company ended the quarter with $678 billion in commercial remaining performance obligations, 84% higher than a year earlier. Management pointed to AI as a key driver of that cloud backlog.
S&P Global rates Microsoft AAA, the highest possible credit grade. Between the backlog, the cloud growth rate, and that balance sheet, the case for continued dividend increases rests on more than one quarter's numbers.
Source: The Motley Fool
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