Microsoft Anticipates 10% Dividend Raise as AI Spending Surge Continues

Microsoft has increased its dividend every year for over a decade, and investors are eagerly anticipating this year's raise. The company pays out $0.91 per share on a quarterly basis, with the last six annual increases falling between 9% and 11%. Based on historical data, analysts expect the next quarterly dividend to be around $1.00, which would represent an increase of about 10%.

The software giant's track record is steady enough to support a forecast, with the last six annual increases within a band of 9.6% and 10.7%. Applying this band to the current payment of $0.91, the next quarterly dividend would likely fall between $1.00 and $1.01.

Microsoft's capital expenditures have increased significantly in recent years, with the company allocating $115.9 billion to property and equipment in fiscal 2026, an 80% jump from last year. However, this expenditure is still manageable, and the dividend remains easily affordable, with a payout ratio of about 20%. The earnings underlying the payment are growing faster than the payment itself, with revenue increasing by 18% to $331.8 billion in fiscal 2026.

While the AI spending surge is squeezing Microsoft's free cash flow, the company still has room for a larger dividend increase if it chooses to do so. However, based on its historical behavior, analysts expect an increase of around 10%, which would be announced in September and bring the quarterly payment to $1.00 per share.