Microsoft (MSFT) continues to be a core holding in the long side of my portfolio. I have owned and written about its positive prospects since it was trading at $24 a share last year. The company continues to execute well and the stock has had a nice consistent run over the last 12 months. Microsoft may not be the sexiest equity, but September has shown once again why Mr. Softie should be a part of any value portfolio.
Here are some recent positive catalysts for Microsoft:
- The company recently raised its dividend for seventh time since it originally paid a dividend in 2004. Microsoft said it will raise its payout 15%, and the stock now yields 2.9% based on the new dividend rate.
- Windows 8's release date is now only five weeks away.
- The new OS continues to gain momentum, with HTC unveiling two new phones based on Windows 8. HTC was once the largest android smartphone maker, so this shows major progress in getting the company's software placed with the major manufacturers. That probably does not make Google (GOOG) happy either, as an added benefit.
- Speaking of Google, Microsoft won a preliminary injunction in Germany to halt the distribution of a number of Motorola smartphones and tablets due to infringing on a key Microsoft patent.
According to the business description from Yahoo Finance, "Microsoft Corporation develops, licenses, and supports software products and services; and designs and sells hardware worldwide."
Here are four reasons why Microsoft is still a good value play at $31 a share:
- The company boasts a AAA balance sheet, pays that almost 3% dividend yield, and is expected to increase revenues at a 6% to 8% average rate over the next two fiscal years.
- The median analyst price target on Microsoft is $36. It also sports Standard & Poor's highest rating of "Strong Buy" with a $37 price target.
- Despite a consistent run-up in its stock price over the last year, the stock is still selling near the bottom of its five-year valuation based on P/E, P/S, P/B, and P/CF.
- The company has over $50 billion in net cash on the books, and the stock sells for less than eight times forward earnings after subtracting cash.