Is Microsoft an Investment Worth Considering?
Lior is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I recently entered into a heated debate with a friend over his interest in buying Microsoft (NASDAQ: MSFT) as an investment for his portfolio (just a talk between friends; it wasn’t an investment consultation). I told him that the company’s stock price didn’t move anywhere in almost a decade and if he is interested in an high profitability and potential high growth investment perhaps he should consider one of the big high tech mainstream investments such as Google (NASDAQ: GOOG) or Apple (NASDAQ: AAPL). Before ending this debate I thought it’s high time for me to take another look at Microsoft.
As I have stated before the company’s stock hasn’t done anything worth mentioning in the past decade. During the past five years the stock price ranged between a low of $15.28 in March 2009 and a high of $37 in October 2007.
The high correlation between Microsoft's stock and the S&P500 (during 2012 the linear correlation between their daily percent changes was 0.67) doesn’t make Microsoft's stock much more appealing because in both cases they haven’t done much. During 2012, (UPD) the stock rose by nearly 11.2% and S&P500 by 6.2%. The chart below presents the movement of the company’s stock and the S&P500 during the year.
The last time Microsoft's stock experienced any growth was back in 1999. The Company grew very steadily during the nineties, but since then the company's stock remained almost flat compared to other high tech companies such as Google and Apple.
Let’s check how Microsoft does compare to the other above-mentioned leading high tech companies. For that I examine the operational profitability of all three companies during each quarter of the passing year:
As seen in the chart above, Microsoft's operational profitability is at least as high as Apple’s and slightly better than Google’s.
Further, Microsoft offers a 2.8% yield for its dividend; while Apple and Google offer none or at least rarely(Apple paid a few months back $2.65 per share).
There are also reasons for growth in Microsoft such as the company’s new products such as the Surface tablet to compete with Apple’s i-pad.
But all these arguments just don’t mount up to a good reason to invest in Microsoft. Don’t get me wrong I think it’s a steady and reliable company, but as an investment I don’t think the company has much to offer compared to other stocks.
One of the prime reasons, at least in my opinion, for investing in a high-tech company is the potential for high growth. This was the case for Apple, Google and this used to be the case for Microsoft back in the nineties. I think companies as Apple and Google have a lot more potential to grow in their respective fields than Microsoft has.
For dividend and steady growth there are other companies that could offer these aspects such as Altria Group Inc. (NYSE: MO) that offers a 4.7% yield on its dividend and seems to have a steady growth in recent years. Just the yield on the dividend is a much higher rate than the yield Microsoft offers.
The Foolish bottom line
This means there are much better companies out there that could offer investors better conditions when it comes to growth, dividends and stability than Microsoft’s stock.
This is by no means an investment advice. Use caution when investing in stocks.
For further Reading: Is Exxon Due for a Rally?
liorc has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.