Microsoft’s dividend is small but secure, with a payout ratio of just 24%. The software company returned over $37 billion to shareholders in fiscal 2025 through dividends and buybacks, while still investing heavily in artificial intelligence (AI) and cloud technologies. A fortress-like balance sheet, recurring revenue, and steady cloud growth should support years of dividend increases.

Microsoft (NASDAQ: MSFT) is not a high-yield dividend stock, but yield alone doesn’t define a dividend stock. The company’s predictable revenue, earnings growth, and conservative payout ratio make it a favorite choice for dividend investors. Microsoft funds its dividend out of abundant free cash flow while investing in AI and cloud infrastructure.

Microsoft closed fiscal 2025 with double-digit growth, showing a revenue increase of 15% to $281.7 billion and operating income up 17% to $128.5 billion. Azure and other cloud services revenue grew 39% year over year in Q4, leading to a payout ratio of roughly 24% against earnings, with ample dividend coverage.

Microsoft’s excellent recipe for dividend investors includes a fortress balance sheet, elite credit quality, and a subscription-heavy, enterprise-anchored revenue mix. The company’s consistent dividend growth, strong cash generation, and best-in-class balance sheet make it a solid choice for long-term investors looking for safety and growth.

Investors should not expect a high dividend yield from Microsoft, but the company’s growth, manageable payout ratio, and commitment to returning cash to shareholders make it an attractive option. With Microsoft’s strong position in key markets and diverse offerings, the company is poised for continued dividend growth and financial stability.

Read more at Nasdaq: This Is My Favorite Dividend Stock (by Far)