Microsoft nearing 52 week lows, 3.48% yield

MSFT pays out 0.23 cents per quarter, meaning that annually they pay out 0.92 cents per share. As of Friday’s closing price of 26.455 it currently yields 3.48%. The stock is also nearing its 52 week low. Image

Hopefully, this upcoming week MSFT and the market will have one really good down day and I can pick up MSFT shares at or above 3.5% & preferably at new 52 week lows. There is nothing more that I like than buying great companies at yearly lows, with fat yields, and then seeing their stock go higher buy buying the stock when most people are bearish on it.

The company has 66.07B in cash and 12.37B in debt, that is it has 5.3x as much cash as debt or a net cash balance of 53.7B. In the last 12 months the company generated 15.71B in profits, so that means that MSFT has 3.4x years worth of earnings in cash. This is what I call a fortress balance sheet, they are loaded with cash. Furthermore, they only pay out 49.7% of their earnings as dividends (0.92 Dividend Per Share / 1.85 Earnings Per Share).

With 53 billion dollars of cash in the bank and yearly profits of 15 billion Microsoft has the resources to invest in its own organic growth and create its own new and innovative products and also the capability to make strategic acquisitions and essentially buy growth. The reason why its stock price is low is because in their most recent quarter sales were down 7.9% yoy and earnings were down 22.2% YOY. I believe that this is just a temporary slow down and that overtime Microsoft will continue to grow profits and their dividend faster than inflation. Here is a chart of their dividend history. Image

As you can see in 2008, just 4 years ago, its dividend was only 0.11 cents but today, in 2012, they are paying out 0.23 cents. That is a more than a 100% increase in their payout in just the last 4 years! So come this week, I can only hope that the market gods bless me with a down day so that I have the opportunity to buy the World’s largest software maker at a big fat yield of 3.5%.

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