Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Good Stocks

The Microsoft Money Machine Delivers Again

There is a reason I love Microsoft (NASDAQ: MSFT) stock; the Microsoft money machine just delivered another great set of financial numbers.

For instance, Microsoft reported a quarterly gross profit of $22.649 billion on 30 September 2019. That gross profit was down from $23.305 billion in June but it is great.

In addition, Stockrow estimates Microsoft’s revenues grew at a rate of 13.36% last quarter. That growth rate was up from 12.07% in the prior quarter.

In total, Microsoft reported quarterly revenues of $33.055 billion on 30 September 2019, down from $33.717 billion three months earlier. Thus, Microsoft’s business is still growing and delivering revenues.

How Much Money is Microsoft Making?

Microsoft is making a little more money from those revenues. The software giant reported a quarterly operating income of $12.686 billion in September 2019, up from $12.405 billion in June.

However, Microsoft’s quarterly net income dropped from $13.187 billion in June 2019 to $10.678 billion in September 2019. Thus, Microsoft’s income is high but not stable.

I think that gives Microsoft a high margin of safety and make it a great income and growth stock. The margin of safety is high because Microsoft generates a lot of cash.

For instance, Microsoft reported a quarterly operating cash flow of $13.818 billion on 30 September 2019. Conversely, that cash flow fell from $16.608 billion in June 2019.

Meanwhile, Microsoft recorded a quarterly free cash flow of $10.433 billion on 30 September 2019. That quarterly free cash flow was down from $12.057 billion on 30 June 2019.

Microsoft is still running vast amounts of cash through its till despite the cash flow drops. I think that equals a high margin of safety because I equate cash with safety.

Microsoft has $136.636 billion in Cash!!

Incredibly Microsoft had $136.636 billion in cash and equivalents on 30 September 2019.

Moreover, Microsoft’s cash and equivalents grew from $133.819 billion on 30 June 2019. Thus, Microsoft is an incredibly cash-rich company that could make some big acquisitions if Satya Nadella wishes.

Notably, Microsoft is using that cash to expand its cloud capacities. For instance, Microsoft acquired the file migration app Mover to speed the migration of files to Microsoft 365 on 21 October 2019, a press release reveals.

How Microsoft uses its Cash

Microsoft claims Mover supports migration from Dropbox, Box, Egnyte, Google Drive, and other storage solutions into OneDrive, the Azure Cloud, and Sharepoint. Thus, Mover could help Microsoft make money from file storage.

Thus, Mover could create more customers for Microsoft cloud solutions by making it easy to move files and apps into the Azure cloud. Plus, you can access Mover through the Microsoft 365 bundle that includes Office 365, TechCrunch reports.

Predictably, Mover for Distribution is now available in Microsoft AppSource. To explain, AppSource is Microsoft’s answer to the Apple (NASDAQ: AAPL) App Store. Microsoft claims Mover for Distribution can move up to 70 of terabytes of data each date. To clarify, a terabyte is equal to 1,024 gigabytes of data.

Hence, Microsoft uses its cash to grow its platform and make more money by adding capabilities. I think that makes Microsoft a proven growth company with a high margin of safety.

The Microsoft Dividend Grows

Best of all, Microsoft (NASDAQ: MSFT) offers a growing dividend. Microsoft is scheduled to pay a 51₵ quarterly dividend on 20 November 2019.

That dividend is up from 46₵ paid on August 14, 2019. Moreover, reports Microsoft has delivered 15 years of dividend growth.

In detail, on 30 October 2019 Microsoft shareholders received a 1.41% dividend yield, an annualized payout of $2.04, and a payout ratio of 42.95%. Thus, Microsoft is a great dividend stock, I think Mr. Market fairly priced at $143.68 on 30 October 2019.

Microsoft is the Total Package Stock

I think Microsoft is a total package stock that delivers everything most investors need.

To explain, I consider Microsoft a good dividend stock, a good income stock, a good growth stock, and a value investment. I call Microsoft (NASDAQ: MSFT) a value investment because Mr. Market often ignores and under-appreciates it. Thus, I think Microsoft was a little undervalued at $143.68 on 30 October 2019.

However, I think Microsoft is a good growth stock because of its clever expansion, and a good income stock because of the dividend. Finally, Microsoft has a high margin of safety because of the $136.636 billion in cash and equivalents.

Thus, I label Microsoft the total package of stocks that delivers on all points. If you want a safe, moneymaking stock, with proven growth potential, that pays a good dividend, you need to investigate Microsoft.