With the recent news of Dell, Inc. (DELL) going private with some financial help from Microsoft Corporation (MSFT), it has brought to the forefront talk of Microsoft doing the same. Even a little Seattle newspaper ran an article in February talking about the possibility.
So what does this mean for you as an investor in Microsoft stock? It means you can win either way! Here's how (based off a buy and hold approach):
Scenario 1: Let's say Microsoft doesn't go private and stays public. You can win with a good entry price point into a stock that is rolling along steady and increasing dividends. Look at the past 5 years of dividend payments and my next 5-year estimate of payouts (below).
*Estimate using a conservative 12% increase going forward, based off prior year increases.
|Year||Total Yearly Dividends||Increase From Prior Year|
|2013||.93 "est."||.10 "est."||12% "est."|
|2014||1.04 "est."||.11 "est."||12% "est."|
|2015||1.16 "est."||.12 "est."||12% "est."|
|2016||1.30 "est."||.14 "est."||12% "est."|
|2017||1.45 "est."||.15 "est."||12% "est."|
You can see that if you get your stake in Microsoft below the $30 per share mark, say for $28.50, by 2017 your yearly dividend yield will have climbed from its current 3.3% yearly yield to 5% ($1.45/$28.50). Not bad for a solid stock, thus you win.
Scenario 2: Now let's say the big wigs at Microsoft want to take the company private. They would then buy the stock at a premium from you and you win again. Just like those who purchased Dell in its 2012 dip before the buyout. You also get to keep any of the dividends paid before the buyout, you win again.
This is why I say, "Who cares?" Whichever way it goes, you win. I like buying high yielding dividend stocks, especially ones with a 5% or greater yield. But it is nice to have a solid stock like Microsoft to help steady the portfolio fort against the riskier stocks, in hopes that Microsoft too will become a solid 5%+ yielder based off the purchase price sometime down the road.
And now may be the time to buy on this dip. Microsoft's most recent closing price of $27.88 is well below the $30-$32 range it hovered at for most of 2012.