Microsoft (NASDAQ:MSFT) is one of the titans of the technology sector. But I’ve been making the case for some time that Microsoft stock can be rightfully thought of as a “forever stock.”
I know that Microsoft isn’t going to become a boring, blue-chip stock anytime soon. The company still has a lot of growth in its future, although its growth is likely to slow going forward.
However what separates Microsoft from many other companies is that it has multiple, widely-used products. And that’s why you can ignore the noise surrounding Salesforce (NYSE:CRM) becoming a threat to Microsoft Teams.
Many Paths to Victory
One of our few family Thanksgiving traditions is a rousing game of Monopoly. I don’t know what hooked my kids on the game, but they enjoy it. And now, even with my kids being at an age when board games with Dad should not rank high on their to-do lists, it’s something they prioritize more than I do.
Of course, now that my kids are older, they’ve learned all my tricks. One thing I always used to tell them was that you can’t rely on the luck of the dice. And strategy has to be employed in the game. In Monopoly, the most important thing you can do is give yourself multiple paths to victory.
Now that they fully understand this, it’s hard for me to beat them. They know what my preferred paths to victory are.
This anecdote has a point that is relevant to Microsoft. Specifically, the company has given itself multiple paths to victory due to its many business units.
Microsoft’s diversity was on full display this year. The company’s collaboration tool, Microsoft Teams, was given an opportunity to shine during the pandemic, as more companies were forced to allow their employees to work remotely.
But the company has made a successful pivot into cloud computing. And in its most recently reported quarter, the sales of its Intelligent Cloud business, which includes its public cloud offering, jumped 20% year-over-year to $13 billion.
Meanwhile, Microsoft is well-positioned in the video-game sector with its signature product, the Microsoft Xbox console.
Making Advancements in Artificial Intelligence
Microsoft is also investing heavily in artificial intelligence (AI). In fact, the company’s cloud platform, Azure, is one of the beneficiaries of machine learning.
As Tom Taulli, another InvestorPlace columnist, wrote recently, Microsoft continues to incorporate new AI features, including natural language processing (NLP) and deep learning, into Azure.
Microsoft is also making a long-term bet to the tune of $1 billion on Open AI. The bet that Microsoft is making will take time to bear fruit. However, the initiative shows that Microsoft is continuing to think ahead to ensure that it will continue to have multiple paths to success in the future.
Did I Mention MSFT Stock Pays a Dividend?
Unlike many of the other high-flying tech stocks, Microsoft pays a dividend. And while the yield is not particularly impressive, the company managed to pay out $3.86 billion to shareholders in its most recently reported quarter. The company has increased its dividend for ten straight years, and it’s done so at an average rate of around 8.75%.
And if you prefer cash flow as a measure of corporate health, Microsoft excels in that area as well. In fact, the company has ample cash reserves that are more than sufficient to cover its $63.6 billion of debt.
Simply put, Microsoft is a premium stock that has a premium valuation. And it’s worthy of that designation because, due to its multiple growth paths, it’s easy to recommend Microsoft stock.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for InvestorPlace since 2019.