A strong long-term performer for its shareholders, the Microsoft Corporation (NASDAQ:MSFT) continues to deliver steady capital gains and appears to be more resilient to recent market fluctuations than most of its big-name peers in the Technology sector.
The company’s share price suffered a massive drop of more than 60% in the aftermath of the dot-com bubble nearly two decades ago. Additionally, after recovering some of those losses, the share price declined again by nearly 60% in the aftermath of the 2008 financial crisis.
However, notwithstanding the two pullbacks of more than 50% mentioned above, Microsoft has managed to deliver steady capital gains for the better part of the past two decades. Since hitting its low for the first time in more than two decades after dropping to just slightly above $15 in March 2009, the share price has advanced nearly nine-fold.
After dropping below the 200-day moving average briefly in February 2019, the 50-day moving average has crossed back above its 200-day counterpart by mid-March and continues to rise. The share price has been fluctuating above and below the 50-day moving average since early August and a clear break above the moving average could signal another share price surge towards new heights.
Additionally, Microsoft’s current share price has to rise at least 13% before it reaches the analysts’ current average target price of $154.53. Also, nearly 80% of the analysts currently covering the stock — 27 out of 34 — are confident enough in the company’s outlook to hold a “Buy” (13) or a “Strong Buy” (14) recommendation.
After nearly tripling over the preceding four years, the share price reversed direction and headed lower just before the onset of the trailing 12-month period. With the overall market heading into a correction due to the escalation of the trade dispute with China and uncertainty over the Federal Reserve’s actions on interest rates, Microsoft’s share price followed suit and retreated more than 18% in the fourth quarter of 2018. By December 24, 2018, the share price had reached its 52-week low of $94.13.
However, as soon as the downward pressure from the overall market correction subsided, Microsoft’s share price returned to its long-term uptrend. By mid-March, the share price had recovered all its fourth-quarter 2018 losses and continued to rise. It even began to set a series of new all-time highs along the way.
By the end of trading on July 24, 2019, the share price had risen more than 23% above the price level from the beginning of the trailing one-year period in early October 2018. On July 24, 2019, the share price peaked at its most recent all-time high of $141.34 for a total gain of more than 50% over its 52-week low from late December 2018. Since peaking in late July 2019, the share price has pulled back 4.7% and closed on October 2, 2018 at $134.65.
While slightly lower than its recent all-time high, the Oct. 2 closing price was still nearly 17% higher than it had been one year earlier, as well as 43% above the 52-week low from Christmas Eve 2018. Additionally, the share price has more than tripled over the last five years and produced a 206% total gain.
Microsoft has complemented its robust asset appreciation with small but steadily rising dividend income distributions. While these distributions are small compared to the overall market averages, Microsoft’s current dividend yield is superior to the average yield of the overall technology sector and the average yield of the company’s peers in the Application Software industry segment.
The dividend income has augmented the 16.9% gains from asset appreciation and produced a total return of 18.7% on shareholders’ investments over the trailing 12-month period. Similarly, the dividend income payouts pushed the stock’s total return to 143% over the last three years. The asset appreciation has already tripled shareholders’ investments over the past five years and produced a 206% total return. However, the additional income from dividend distribution has pushed the total return of Microsoft long-term shareholders to 212% for the five-year period.
Microsoft Corporation (NASDAQ:MSFT)
Founded in 1975 and headquartered in Redmond, Washington, the Microsoft Corporation develops, licenses and supports software products, services and devices worldwide. The company’s Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, including Office, Exchange, SharePoint, Skype for Business and related Client Access Licenses (CALs). Additionally, this segment provides the consumer productivity Office suite of applications, as well as Office 365 consumer services, such as Skype, Outlook.com and OneDrive. The Dynamics segment provides business applications for financial management, enterprise resource planning, customer relationship management, supply chain management and the LinkedIn online professional network.
The Intelligent Cloud segment licenses server products and cloud services, such as Microsoft SQL Server, Windows Server, Visual Studio, System Center, as well as Azure, a cloud platform with computing, networking, storage, database and management services. Additionally, this segment provides the Premier Support and Microsoft Consulting enterprise services, which assist in developing, deploying and managing Microsoft server and desktop solutions. The Intelligent Cloud segment is also involved with training and certifying developers and IT professionals. Microsoft’s More Personal Computing segment comprises licensing of the Windows operating system to Original Equipment Manufacturers (OEM), patent licensing, Windows Internet of Things, MSN display advertising and Windows Phone licensing. Additionally, this segment designs and manufactures electronic devices which include the Microsoft Surface tablet devices, phones and PC accessories, as well as search and advertising through the company’s Bing and Bing Ads platforms. This segment also provides gaming platforms, including Xbox hardware, Xbox Live and video games.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.