Is Microsoft (MSFT) the Best NASDAQ Dividend Stock to Buy?

Microsoft (MSFT) has long been a favorite among income investors, thanks to its consistent dividend growth and attractive yield. As of January 2025, Microsoft's annual dividend is $3.32 per share, with a yield of 0.78%. The company pays dividends every three months, with the next ex-dividend date on February 20, 2025.



Microsoft's dividend history shows a steady increase in dividends over the past decade, with a compound annual growth rate (CAGR) of approximately 10%. This consistent growth, coupled with a stable payout ratio of around 25%, indicates that Microsoft is committed to returning capital to shareholders while maintaining a strong balance sheet.



Microsoft's dividend yield of 0.78% is higher than the industry average of 0.4%, making it an attractive option for income-focused investors. However, it's essential to consider that Microsoft's yield has been declining due to the company's significant share price appreciation. This trend suggests that Microsoft may be focusing more on capital growth than income distribution.



Microsoft's stock price history shows a consistent upward trend, with the company's market capitalization reaching over $2 trillion in 2025. This strong performance is driven by Microsoft's dominant position in the technology sector and its ability to generate substantial free cash flow.



Microsoft's dividend cover ratio, which measures the extent to which earnings cover dividends, is often below 1.5. This lower cover ratio raises concerns about the sustainability of Microsoft's dividends if earnings decrease. Investors should monitor Microsoft's earnings and cover ratios closely to assess the sustainability of its dividend policy.

In conclusion, Microsoft (MSFT) is an attractive option for income-focused investors, thanks to its consistent dividend growth, stable payout ratio, and higher-than-average yield. However, investors should be aware of the potential risks associated with a lower dividend cover ratio and the company's focus on capital growth. As always, it's essential to conduct thorough research and consider your investment goals and risk tolerance before making any investment decisions.