Microsoft's Artificial Intelligence Boost Masks Hidden Dividend Gem

Microsoft's dividend yield may seem low at 0.8%, but it can be misleading due to the company's significant stock price gains over the years. If not for these gains, its yield would be higher.

The company has been raising its dividend consistently, with a recent increase of 8% that brings the quarterly payout to $0.98 per share. This marks a 151% rise in its quarterly payout over the past decade, from $0.39 per share a decade ago.

Microsoft's stock price has risen 65% since five years ago, when it was trading at around $300. At that time, its yield would have been around 1.3%, higher than the S&P 500 average yield of about 1.1%. As the share price continues to rise, the dividend yield comes down.

Despite a challenging year for Microsoft with modest 2% year-to-date gains, long-term investors may find it an opportune time to buy in given its modest valuation and growth prospects driven by artificial intelligence.