Happy Monday,
Microsoft is the largest position in my dividend growth portfolio. More than half of my cost basis went in this year, mostly from February to May, and I'm up 59.55% on it.
Google is another one of my big holdings. I built that position in the April to May 2025 sell-off, and before last week it was a 100% total return.
Both reported earnings on the same day. Microsoft went up and Google tanked. Here's what I'm doing with each.
Today's Topics:
Why I Own $114,464 of Microsoft Stock (Watch Here)
Google Stock Just Tanked. Here's What the Market Got Wrong. (Watch Here)
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The Key Story
Why I Own $114,464 of Microsoft Stock
📊 Research MSFT: DividendData.com/stocks/msft
Microsoft ($MSFT) did $92.28B of revenue in the quarter, and the stock was up 3% after hours. One of my favorite things when investing is when a company's largest business segment is its fastest growing. That's what's happening at Microsoft right now.
Azure: $33.17B, 35.9% of revenue, up 48.2% year over year. In just 2 years, quarterly Azure revenue more than doubled from $16B to $33B.
Microsoft 365 Cloud: $27.78B, up 17.2% year over year. It's pretty high margin subscription revenue because it's software.
Still free cash flow positive: Google, Meta and Amazon have all gone negative. Microsoft reported $18.63B of free cash flow this quarter, even with $39.37B of capex. Two years ago, quarterly capex was $14.92B.
Cash machine: Operating cash flow hit $195.8B over the trailing 12 months, up 33%. The latest quarter, $58B, was the highest ever.
Booked revenue: Commercial remaining performance obligations are $677B, up 72.7% year over year.
Microsoft also just raised its dividend 7.69%, with 20 plus years of annual increases. The yield is small, about 0.74% forward when I filmed, but the free cash flow payout ratio is 45.1%. It's a very sustainable payment.
The valuation: I value Microsoft on operating cash flow.
Over the past 10 years, its median price to operating cash flow is 23.18. It was trading at 20.13 when I filmed. A return to that median gives an implied fair value of $611, about 15.1% upside.
On short term free cash flow it looks expensive: a 65.77 price to free cash flow against a 10 year median of 34.71. I think that can be misleading, but in the long run free cash flow is the most important metric.
My Plan: HOLD. I'm still planning to hold Microsoft stock well into the future. I'm not necessarily adding right now, but if it does dip over the coming year, I could definitely see myself dollar cost averaging in again.
Stock Analysis
Google Stock Just Tanked. Here's What the Market Got Wrong.
📊 Research GOOGL: DividendData.com/stocks/googl
Alphabet ($GOOGL) fell 10.25% after hours on earnings.
Two things are behind it. Fear around Google Search is coming back, and the stock looks super expensive on short term free cash flow.
Search: $63.35B of revenue, up 12% year over year, but up just 0.1% quarter over quarter. For the first time in Google's history, Search was less than 50% of revenue. Not because it's declining, but because the rest of Google is growing around it.
Google Cloud: $30.7B of revenue, up 102% year over year, now 24.1% of revenue. A lot of that is Google selling its TPU chips to outside customers. Cloud operating income was $11.12B in the quarter, up 209% year over year.
Negative free cash flow: $51.3B of capex in the quarter. That means free cash flow of about negative $9B, the second negative quarter in a row.
Still growing: Operating cash flow was $179B over the trailing 12 months and $42.29B in the quarter.
The balance sheet: $265B of cash and short term investments against $125B of debt. I am not worried at all about Google's balance sheet.
You should not be misled by thinking Google's negative free cash flow means it's a declining business. They are investing this money from a position of strength.
The valuation: EPS is messed up by paper gains on Google's stakes in SpaceX and Anthropic, so I use operating cash flow. When I filmed, Google traded at a 22.18 price to operating cash flow against a 5 year median of 18.33 (implied fair value $268). The 3 year median of 19.97 gives $292, which is exactly where this 10% sell-off got you.
Alphabet closed Friday, Oct 30 at $279.84, below that $292 fair value.
The bear case is free cash flow. At filming it traded at a 201 price to free cash flow.
If Google's free cash flow is negative next year, is Google worthless all of a sudden? No. They're generating more revenue and more operating cash flow than they ever have.
My Plan: HOLD, and tempted to add. I think this 10% sell-off is pretty healthy. I'm not scared or re-evaluating my position in Google.
If anything, it's tempting to continue dollar cost averaging and building out that position. You can make the argument Google is now trading around fair value.
Dividend News
New Dividend Increases This Week
Get all Dividend Raises, Cuts, and Declarations: https://www.dividenddata.com/news
V - Visa raises quarterly dividend by 16.4% to $0.78/share
ABBV - AbbVie raises quarterly dividend by 5.2% to $1.82/share
XOM - ExxonMobil raises quarterly dividend by 3.9% to $1.07/share
APH - Amphenol raises quarterly dividend by 20.0% to $0.15/share
MPC - Marathon Petroleum raises quarterly dividend by 10.0% to $1.10/share
MPLX - MPLX raises quarterly distribution by 12.5% to $1.2111/share
LNG - Cheniere Energy raises quarterly dividend by 12.6% to $0.625/share
DHI - D.R. Horton raises quarterly dividend by 11.1% to $0.50/share
HIG - The Hartford raises quarterly dividend by 11.7% to $0.67/share
ROK - Rockwell Automation raises quarterly dividend by 5.1% to $1.45/share
ETR - Entergy raises quarterly dividend by 6.3% to $0.68/share
LDOS - Leidos raises quarterly dividend by 4.7% to $0.45/share
STX - Seagate Technology raises quarterly dividend by 2.7% to $0.76/share
HUBB - Hubbell raises quarterly dividend by 7.0% to $1.52/share
VOYA - Voya Financial raises quarterly dividend by 21.3% to $0.57/share
LECO - Lincoln Electric raises quarterly dividend by 10.1% to $0.87/share
ATR - AptarGroup raises quarterly dividend by 4.2% to $0.50/share
NEU - NewMarket raises quarterly dividend by 8.3% to $3.25/share
SCL - Stepan raises quarterly dividend by 2.5% to $0.405/share
TRU - TransUnion raises quarterly dividend by 8.0% to $0.135/share
BRX - Brixmor Property Group raises quarterly distribution by 7.3% to $0.33/share
CHDN - Churchill Downs raises annual dividend by 7.1% to $0.469/share
WAL - Western Alliance raises quarterly dividend by 9.5% to $0.46/share
JOE - St. Joe raises quarterly dividend by 12.5% to $0.18/share
UNF - UniFirst raises quarterly dividend by 2.7% to $0.375/share
STNG - Scorpio Tankers raises quarterly dividend by 66.7% to $0.75/share
LPG - Dorian LPG raises quarterly dividend by 25.0% to $1.25/share
DK - Delek US raises quarterly dividend by 17.6% to $0.30/share
PBF - PBF Energy raises quarterly dividend by 18.2% to $0.325/share
Earnings News
Huge Earnings This Week (Apple, Advanced Micro Devices, Palantir, McDonald's, Pfizer, Qualcomm, ConocoPhillips, Duke Energy, Realty Income, Airbnb)
Top Dividend Stocks: McDonald's, Pfizer, Realty Income, ConocoPhillips, Duke Energy, Southern Company, Kimberly-Clark, Consolidated Edison, Enbridge, etc.
Top Growth Stocks: Apple, Advanced Micro Devices, Palantir, Qualcomm, Arm Holdings, Shopify, Uber, Airbnb, etc.
See every company reporting, day by day: Earnings Calendar, week of November 2
Top Dividend Posts on X
Get a new dividend chart every day by following @dividend_data on X. Here are 3 of our most popular recent posts:
Buffett's Coca-Cola: Coca-Cola ($KO) pays Berkshire $848,000,000 this year at its $2.12 a share dividend, a 65.28% yield on Berkshire's $1,299,000,000 cost. Buffett started buying in 1988, and the dividend is up more than 2,700% since. See the post
Visa's raise: Visa ($V) lifted its quarterly dividend 16.42% to $0.78, more than double the $0.375 it paid in early 2022. See the post
AbbVie's raise: AbbVie ($ABBV) raised its quarterly dividend 5.20% to $1.82, more than 4 times its 2013 rate of $0.40. See the post
Earnings and Dividend News Links:
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Zach
Founder, Dividend Data
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