We recently published a list of 15 Best NASDAQ Dividend Stocks To Buy. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best NASDAQ dividend stocks to buy.
The NASDAQ, heavily comprised of technology stocks, has been on a consistent upward trajectory for some years. In 2023, it experienced remarkable growth, marking its best performance since 2020 with an increase of over 43%. In 2024, the index continued to surpass market expectations with a 28.64% gain. This impressive performance is largely driven by the excitement surrounding artificial intelligence, which has significantly boosted major tech stocks and the broader market throughout 2023 and into this year. Analysts suggest that the NASDAQ could be the index of the future, as its companies have shown a strong ability to adapt to evolving market trends.
NASDAQ’s consistent outperformance can be observed over several years. According to a report by Invesco, since January 1, 2008, the Nasdaq-100 Index has delivered a cumulative total return of 750%, significantly outpacing the broader market’s 315% return. This success is largely attributed to the innovation driven by tech companies, which continues to attract investors. For instance, the technology sector in the broader market has achieved an annualized total return of 20.65% over the past decade, compared to 12.80% for the market. This leadership is understandable given the rapid adoption of technology in recent years. The Industry Classification Benchmark (ICB) noted that the Nasdaq-100 has approximately 55% exposure to the tech sector, in contrast to about 32% for the broader market.
READ ALSO: 12 Monthly Dividend Stocks with Over 5% Yield and Warren Buffett’s 10 Cheap Stock Picks
Tech companies are not only driving innovation but are also swiftly adjusting their dividend strategies. In 2024, many prominent tech firms began issuing dividends, significantly boosting the overall dividend pool. Although dividends are traditionally linked with value stocks rather than the high-growth companies fueling the AI surge, analysts suggest this shift broadens the appeal of these stocks to new investor groups while putting surplus cash to use. Typically, growth-focused companies prioritize reinvestment over returning earnings to shareholders. However, experts like Ted Mortonson from Baird argue that these dividend payments won’t undermine the companies’ future dominance. Here are some other comments from the analyst:
“I don’t view it as a problem. I view it as they’ve won. They’ve won the technology side. They’ve won on the business-model side, and they’re going to win on the Gen AI cycle.”
Overall dividends are becoming increasingly popular among investors, with many US companies either raising or maintaining their payouts. Howard Silverblatt, a Senior Index Analyst at S&P Dow Jones Indices, suggested that with an anticipated reduction in interest rates by the FOMC in 2025, coupled with record earnings forecasted for the fourth quarter of 2024 and the entire year of 2025, companies might allocate more funds towards substantial dividend hikes in the upcoming year. He further mentioned that February, traditionally the peak month for dividend increases, is expected to see even more significant growth as some firms may look to compensate for previous conservative strategies. In 2024, the large-cap companies in the broader market outperformed many others, achieving record levels in earnings, sales, and dividends. For 2025, a projected 8% rise in dividend payments is expected, up from a 6.4% increase in 2024.
Our Methodology
For this list, we scanned Insider Monkey’s database of 900 hedge funds as of the third quarter of 2024 and selected companies that are trading on the NASDAQ exchange and also pay dividends to shareholders. From that list, we picked 15 stocks with the highest number of hedge fund investors and ranked in ascending order of hedge funds’ sentiment toward them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is an American multinational tech conglomerate. Its achievement stems from its unmatched leadership within the enterprise ecosystem, driven by its strategic emphasis on providing integrated solutions designed specifically for business needs. The company’s Intelligent Cloud segment, driven by Azure, has become the company’s primary growth driver, generating $91 billion of its $211 billion revenue in FY2024, accounting for 43% of the total. With a 22% share of the global cloud market, Azure ranks as the second-largest provider after AWS. Its hybrid cloud features, which effectively merge on-premises and cloud-based systems, have set it apart, particularly for enterprise customers. The segment’s 67% gross margin highlights the scalability and profitability of Microsoft’s cloud services, making it a central component of the company’s overall business strategy.
In fiscal Q1 2025, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $65.6 billion, which showed a 16% growth from the same period last year. The company’s operating income came in at $30.6 billion, up 14% from the prior-year period. In addition, its revenue from server products and cloud services rose by 23%, primarily fueled by a 33% increase in Azure and other cloud services.
Microsoft Corporation (NASDAQ:MSFT)’s cash position also came in strong. The company ended the quarter with over $20.8 billion available in cash and cash equivalents, up from $18.3 billion in the same quarter last year. It generated over $34 billion in operating cash flow, growing from $30.5 billion in Q1 2024. This cash generation enabled the company to return $9 billion to shareholders through dividends and share repurchases.
On December 4, Microsoft Corporation (NASDAQ:MSFT) declared a quarterly dividend of $0.83 per share, which was in line with its previous dividend. It is one of the best dividend stocks on our list as the company has been growing its payouts for 19 consecutive years. The stock has a dividend yield of 0.78%, as of January 15.
At the end of Q3 2024, 279 hedge funds tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ:MSFT), the same as in the previous quarter. These stakes have a total value of more than $91 billion. Among these hedge funds, Bill & Melinda Gates Foundation Trust was the company’s leading stakeholder in Q3.
Overall, MSFT ranks 1st on our list of best NASDAQ dividend stocks to buy. While we acknowledge the potential for MSFT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.
