Microsoft Corporation (NASDAQ:MSFT) shares were recently making new 52-week highs at nearly $33. However, the stock has seen a pullback due to a recent correction in tech stocks over earnings concerns and weak PC sales. The stock now trades just under $29 per share, providing investors with another buying opportunity. Here are four reasons to consider buying Microsoft on the recent dip:
1. Microsoft's Windows 8 is the latest version of the popular PC operating system and it is expected to be launched on October 26, 2012. In the past, a new release of Windows has created an upgrade cycle, as it often motivates consumers and businesses to buy new PCs and software. Conversely, it is not uncommon for buyers to hold off on buying a new PC or software if they know a new version will soon be available. This can lead to soft sales in the short term, but that can create pent-up demand once the latest version is released. That is why Microsoft could see stronger sales in the coming quarters.
2. While many investors think of Windows when they think of Microsoft, the company is also involved in a number of other businesses that have strong growth potential. Microsoft owns Skype, which is a popular Internet based communications service. It also is a leader in the video gaming industry with its popular Xbox game system and Kinect controller. Its also about to launch the new "Surface" tablet on October 26. This tablet is getting positive reviews and it will feature Windows 8, and a keyboard that also serves as a cover.
3. Microsoft shares make sense for income investors thanks to an attractive "bond-like" yield. This company has a strong record of paying and increasing dividends. For example, in 2006, the quarterly dividend was just 8 cents per share, but thanks to regular increases, the quarterly dividend is now 23 cents per share. That means the dividend has nearly tripled in the past six years or so, and that makes Microsoft a solid dividend growth stock.
4. Microsoft has a fortress-like balance sheet that gives the company financial flexibility, lowers risk for shareholders and adds safety to the dividend payment. The balance sheet currently has about $62 billion in cash and just around $12.78 billion in debt.
Here are some key points for MSFT:
- Current share price: $28.82
- The 52 week range is $24.30 to $32.95
- Earnings estimates for (fiscal year) 2013: $2.99 per share
- Earnings estimates for (fiscal year) 2014: $3.28 per share
- Annual dividend: 92 cents per share, which yields 3.1%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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