Investing in the right company can be a game-changer for your financial future. Microsoft Corporation (MSFT), one of the tech giants, has proven to be a remarkable investment opportunity over the years.
Let’s delve into the journey of investing $10,000 in MSFT five years ago and explore the potential returns you would have reaped today.
The Initial Investment
On June 3, 2019, the closing price of Microsoft stock was $119.08. With an initial investment of $10,000, you could have purchased approximately 84 shares (rounded down) of MSFT at that time.
The Power of Dividends
MSFT has a long-standing history of rewarding its shareholders with dividends.
Over the past five years, the company has consistently increased its dividend payouts, reflecting its strong financial performance and commitment to shareholder value.
Here’s a breakdown of the dividends you would have received on your 84 shares:
| Year | Dividend Per Share | Total Dividends Received |
|---|---|---|
| 2019 | $1.84 | $154.56 |
| 2020 | $2.04 | $171.36 |
| 2021 | $2.24 | $188.16 |
| 2022 | $2.48 | $208.32 |
| 2023 | $2.72 | $228.48 |
| 2024 | $3.00 (estimated) | $252.00 |
As you can see, the dividends alone would have accumulated to a substantial amount of $1,202.88 over the five-year period.
The Growth of Your Investment
Microsoft share price has experienced remarkable growth over the past five years, driven by the company’s strong financial performance, innovative products, and strategic acquisitions. As of May 31, 2024, the closing price of Microsoft shares was $415.13.
If you had held onto your 84 shares from the initial investment, your portfolio would have grown to a staggering value of $34,870.92 (84 shares x $415.13). This represents a remarkable 248.71% increase in value from your initial investment of $10,000.
Combined with the dividends received, your total return would be $36,073.80, translating to a whopping 260.74% return on your initial investment over the five-year period.
Related: Investing $10,000 in NVIDIA Corp ( NASDAQ: NVDA) 5 Years Ago Would Have Earned You This Much Today
Financial Performance and Key Metrics
To better understand the driving forces behind MSFT’s impressive growth, let’s examine some key financial metrics from the company’s financial statements:
Revenue Growth:
- Microsoft revenue has consistently grown over the past four years, rising from $143.02 billion in FY 2020 to $211.92 billion in FY 2023, reflecting a robust compound annual growth rate (CAGR) of 13.86%.
- This revenue growth can be attributed to the company’s strong performance in its cloud computing services, productivity software, and gaming divisions.
Profitability:
- MSFT’s gross profit margin has remained consistently high, ranging from 67.78% in FY 2020 to 68.92% in FY 2023, indicating the company’s ability to maintain a healthy profit margin despite increasing costs.
- The operating margin has also been impressive, rising from 37.03% in FY 2020 to 41.77% in FY 2023, showcasing the company’s operational efficiency and cost control measures.
Cash Flow and Balance Sheet:
- MSFT’s operating cash flow has been consistently strong, growing from $60.68 billion in FY 2020 to $87.58 billion in FY 2023, providing ample resources for reinvestment and shareholder returns.
- The company’s balance sheet remains solid, with a current ratio of 176.92% in FY 2023, indicating a strong ability to meet its short-term obligations.
- MSFT’s long-term debt has decreased from $59.58 billion in FY 2020 to $41.99 billion in FY 2023, reflecting a prudent approach to managing its financial leverage.
Return on Equity (ROE):
- MSFT’s after-tax ROE has consistently been above 35%, peaking at 43.68% in FY 2022, showcasing the company’s ability to generate attractive returns for its shareholders.
- The pre-tax ROE has also been impressive, reaching 50.27% in FY 2022, indicating the company’s strong profitability before accounting for tax liabilities.
These financial metrics demonstrate MSFT’s strong fundamentals, robust growth trajectory, and commitment to delivering value to its shareholders, which have contributed to the impressive returns on your initial investment.
Future Outlook and Potential
Looking ahead, MSFT’s future prospects remain promising. The company’s investments in cloud computing, artificial intelligence, and emerging technologies position it well for continued growth and innovation.
Additionally, MSFT’s diverse product portfolio, including Windows, Office, Azure, and gaming, provides a strong foundation for sustained revenue and profitability.
According to analyst estimates, MSFT’s earnings per share (EPS) are projected to grow at a compound annual growth rate (CAGR) of around 11% over the next three years.
If this growth trajectory materializes, your investment in MSFT could continue to generate attractive returns in the years to come.
Conclusion
If you had invested $10,000 in Microsoft Corporation (MSFT) five years ago, your investment would have grown to an impressive $36,073.80, including dividends, representing a remarkable 260.74% return on your initial investment.
MSFT’s strong financial performance, innovative products, and strategic acquisitions have contributed to this remarkable growth, positioning the company as a compelling investment opportunity for long-term investors seeking capital appreciation and dividend income.
While past performance is not a guarantee of future results, MSFT’s solid fundamentals, diversified product portfolio, and investments in emerging technologies suggest that the company is well-positioned for continued growth and value creation.
However, it’s essential to conduct thorough due diligence and consider your investment objectives, risk tolerance, and overall portfolio diversification before making any investment decisions.