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A Late Bloomer U.S. Blue Chip Is Born! (NYSE:MSFT)

106 views  2012-02-27 17:28   Tags2012  Microsoft  dividend 

Congratulations to Microsoft Corp. (MSFT) on achieving ten years of consecutive annual dividend payments!

MSFT paid out its first quarterly dividend for 2012 on February 14 -- the first of four tenth-year dividend payments. For me, this major milestone means I can now add the #2 world-wide software company to my official list of blue chip stocks. I now also have the option of investing my own money in MSFT (should it sink to my preset buy price), secure in the knowledge that even though the stock may likely trend sideways for another decade, I would receive consistent and presumably growing quarterly dividends.

Some quick MSFT statistics:

  • Stock history: 1986 - 2012
  • Dividend history: 2003 - 2012
  • Current dividend yield: 2.54%
  • 10-year average yield: 2.51% (inc. 2004 special dividend of $3.08)
  • 10-year share price high: $37.06
  • 10-year share price low: $15.28
  • My preset buy price: $10.00

It seems ridiculously anti-climactic to only now give MSFT bona fide status, a blue chip stock if there ever was one. After all,  MSFT had practically achieved blue chip status from its years of gaining international fame by distributing its massively popular Windows products, establishing an enormous economic moat by achieving world-wide dominance in the desktop software industry and easily sustaining its position as the worlds largest tech company since surpassing IBM in 1996 (although eclipsed by Apple in 2010).

However, in order to qualify as a blue chip stock a company must have two salient features: market cap over 1B and a minimum of 10 years consecutive annual dividend payments. The dividend criteria is a very practical, clear cut and useful factor to judge management's resolve to both create shareholder value and demonstrate balance sheet health by distributing a portion of the wealth. Management of a blue chip company issues regular annual dividends. Period. To my mind, investing in non dividend-paying companies is simply rewarding poor management style.

Here's looking at the next decade of regular dividend payments from Microsoft.


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