Why Microsoft Corporation Remains a Solid Long-term Play Following Earnings

The stock price of software maker Microsoft Corporation (NASDAQ:MSFT) has been on a tear of late, following recent earnings beats which have blown expectations out of the water. The company recently reported earnings last week, and much to the cheer of investors, posted near-triple-digit increases in the company’s cloud based business segment, even higher growth rates than those of the previous quarter when the company grew this segment by 90%.

While Microsoft’s dividend yield remains modest at just under 2%, (I was considering this company a few years ago when its yield was above 3%), Microsoft has continued to do a great job at growing its dividend over time, at a double-digit clip. The company is expected to continue to increase its annual distribution in the 15% range over time, and with a very healthy balance sheet and earnings growth, should have no problem doing so.

Microsoft’s moat is one which has been hard to replicate for many software companies in recent decades. The business’ already massive margins have actually increased this past quarter, indicating Microsoft’s ability to control its margins and retain pricing power over the years.

With Microsoft’s global nature, buying into this company as a play on the global software industry appears to be a very solid one heading into a new period of slowing global growth and reduced expectations for valuation bumps, given the heightened valuation multiples we are seeing.

Invest wisely, my friends.