MS sees Microsoft dividend hike supporting teens EPS growth story

Investing.com -- Microsoft’s 10% dividend increase reinforces its strong earnings and return profile, according to Morgan Stanley.

The bank explained that the company lifted its quarterly dividend by eight cents to $0.91 per share, or $3.64 annualized, pushing the yield to 0.7% from 0.6%.

Morgan Stanley said the move “supports a durable strong teens and total return profile at MSFT, framing an attractive risk/reward. Remain OW.”

The bank noted the raise was “in line with prior 5-year average at ~10%,” consistent with Microsoft’s history of annual increases between 8% and 11% over the past decade.

Beyond dividends, Morgan Stanley highlighted Microsoft’s substantial buyback capacity.

The firm pointed out that “over $55 billion [remains] in current share repurchase authorization suggesting buybacks to continue.”

As of June 30, 2025, Microsoft held more than $90 billion in cash and short-term investments and is expected to generate more than $70 billion in free cash flow in fiscal 2026.

Microsoft repurchased $13 billion of stock in fiscal 2025, excluding shares used for tax settlement, and Morgan Stanley expects “slightly higher levels on repurchases in FY26.”

As of the end of June, $57.3 billion remained from its most recent $60 billion program. Microsoft has also “been able to reduce its weighted-average diluted shares outstanding every fiscal year since FY 2005.”

Morgan Stanley added that the dividend yield is “just one component of capital return” within a broader investment case.

The bank forecasts “mid-teens revenue growth” and a 16% EPS compound annual growth rate through fiscal 2028, supporting what it called an “attractive 17% total-return profile at Microsoft.”

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