Key Points
Millions of companies rely on Microsoft’s products and services for their operations.
It has a rock-solid balance sheet, allowing it to weather storms and pursue new opportunities.
As the business continues to expand, the dividend is growing at an impressive rate, too.
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One of the best things about investing is that you can pass your stocks on to your kids after you pass away and put them ahead financially. It’s the gift that keeps on giving as the investments (ideally) continue to grow over time.
For that to happen, though, it helps to make sure you’re leaving your kids’ shares in blue-chip companies that have stood the test of time and will likely continue to do so. In the tech world, that’s not always easy to find because companies come and go as technology evolves.
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One clear exception, though, is Microsoft (NASDAQ: MSFT). If I could choose one tech stock to leave to my kids, it would be this one.
Image source: The Motley Fool.
The tech world’s enterprise giant
Microsoft is one of the oldest tech companies in the world, having been around since 1975. It hasn’t had this longevity by focusing on one area, either. It has grown to arguably the most diversified tech company in the world over the past five decades. It has an operating system (Windows), software (Microsoft 365), a cloud platform (Azure), hardware (PCs, tablets, etc.), gaming (Xbox), and social media (LinkedIn).
It’s important to note that most of the customers fueling Microsoft’s business are other businesses. It’s the world’s No. 1 enterprise software provider, creating an ecosystem in which companies rely heavily on Microsoft for their daily operations.
Financials you don’t have to second-guess
My confidence in Microsoft’s ability to sustain its success also lies in its rock-solid financials and balance sheet.
The $82.9 billion it made in its most recent quarter (ended March 31) is more than Broadcom, Lenovo, and International Business Machines have each made in their four previous quarters combined. You never have to question Microsoft’s ability to make money. And as long as it can do that, it can weather storms or competitively pursue new technologies (like it’s currently doing with artificial intelligence).
Its $78.3 billion in cash on hand also provides a nice safety net if or when the company or economy hits a rough patch or an unforeseen situation occurs.
An underrated perk of owning Microsoft
If we’re talking about passing on stocks to the next generation, we can’t forget the secret sauce: dividends. They compound your returns faster and can produce reliable passive income.
Microsoft isn’t thought of as a dividend stock (it has only averaged a 0.8% yield over the past five years), but its growth rate is the strong point. It has increased its annual dividend for 21 consecutive years, including by 152% over the past decade.
Although far from high-yielding, Microsoft’s dividend is as stable as they come, using only around 21% of its earnings on payouts. It’s well on its way to becoming a Dividend King (a company with 50 consecutive years of increases) and can be a staple for your kids.
Blue chip, a healthy balance sheet, and income-producing are the trifecta you want when you’re looking for stocks that can thrive generationally.
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Stefon Walters has positions in Microsoft. The Motley Fool has positions in and recommends Broadcom, International Business Machines, and Microsoft. The Motley Fool has a disclosure policy.
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