We’ve been huge fans of Microsoft’s (MSFT) investment merits for some time now. We’ve traveled around the US, from Chicago to San Jose to Milwaukee/Madison and Cleveland highlighting the Dividend Growth Newsletter portfolio holding to investors that were open to learning more about the Dividend Cushion ratio. Please view one of the slide decks from our presentation in San Jose , for example.
Not only has Microsoft been a tremendous valuation opportunity for much of the past few years, but its dividend growth prospects, as measured by its solid Dividend Cushion ratio, have simply been pristine since the company initiated the payout. Following Microsoft’s release of solid first-quarter fiscal 2016 results October 23, the company’s shares have converged to our mid-$50s fair value estimate, up from under $30 per share just a few years ago.
New CEO Satya Nadella has the company’s equity firing on all cylinders, and we must say we’ve been very pleased with the performance. As with any company that has leapt to our fair value estimate, however, we won’t be looking to add to the position in the Dividend Growth Newsletter portfolio. Part of the Valuentum methodology embraces the concept of “letting winners run,” and we’ll do so. However, we’ll also be looking at Microsoft as a source of cash in the newsletter portfolio should better opportunities present themselves. No stock is ever a perpetual “buy,” in our view.
