How Much Bigger Can Microsoft's Dividend Get?

The following video is part of our "Motley Fool Conversations" series, in which senior technology analyst Eric Bleeker and consumer-goods editor and analyst Austin Smith discuss topics around the investing world.

In this series, we're reviewing the Dow components to see whether it's time to up their dividends. It's no secret that investors look to the Dow in large part for dividends, as the index yields 2.9%, far above the Nasdaq's 1.5% yield or the S&P 500's 2.5%. Up today is Microsoft, a company that has raised its annual dividend to a juicy $0.80 per share, a 25% gain over the year before. Yet even with that nice yield, Eric says Microsoft investors need to push for more. The company still sported a payout ratio of just 22% last year. With operating cash flow of $30 billion, Microsoft could easily bump the $5 billion in dividends it paid last year to $10 billion over the next few years. That would bring the company to annual dividends of $1.20 per share, or more than a 4% yield at today's prices. Such actions would make Microsoft the go-to value in dividend-paying tech stocks and benefit shareholders over the long run. To see Eric's full thoughts on Microsoft and how its dividend has lots of room to grow, watch the following video.

Microsoft is rapidly becoming one of the most dependable high-yielding stocks in the Dow. However, even with its rapid growth in dividends, it's still yielding below the Dow's average. The Motley Fool has compiled a special free report outlining our top nine dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here to discover the winners we've picked.

At the time thisarticle was published Austin SmithandEric Bleekerhave no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Microsoft.Motley Fool newsletter services recommendApple, Microsoft, and Nokia. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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