Canada’s national newspaper, the Globe and Mail, frequently runs a feature in its business section called “Me and My Money,” where average Canadians discuss how they invest their retirement savings. Author Larry MacDonald does an excellent job telling these stories.
Checking out Flipboard today, I came across MacDonald’s Aug. 4 column about retired banker Charles Fournier, who just happens to write his own investment blog, Financial Freedom is a Journey.
One of Fournier’s best moves as an investor was buying Church & Dwight Co., Inc (NYSE:CHD), the maker of Arm & Hammer baking soda, Trojan condoms, and many other consumer goods. It’s a stock that continues to amaze — one that I recommend investors get to know better.
What’s this got to do with Microsoft Corporation (NASDAQ:MSFT), you ask?
First Purchase of Microsoft Stock
It turns out that Fournier just bought Microsoft for the very first time Sept. 19, adding 240 shares to his portfolio, an event that he writes about in his blog.
Anyone who’s bright enough to have bought one of the most consistent stocks of the last decade — I’m talking about CHD, which hasn’t had a down year since 2007 — is worthy of my attention.
The retired banker offers a bunch of reasons to own MSFT stock, including one I wasn’t aware of.
While I’m optimistic about the company’s prospects, I recently annoyed an InvestorPlace reader by suggesting it ought to get out of the devices business and focus on software.
We agreed to disagree, but other than this one issue, possibly two if you consider CEO Satya Nadella’s pay, I don’t see a problem holding MSFT stock for the next 14 years — something Fournier is planning to do.
So, without further delay, here are 2 things to like about Microsoft stock:
Give Microsoft Credit
You might have known about this, but I didn’t.
Microsoft, according to Fournier, is one of only two companies with an AAA credit rating from Moody’s Corporation (NYSE:MCO), the other being Johnson & Johnson (NYSE:JNJ).
With corporate debt nearing levels not seen since 2008, the fact that Microsoft is in this very select group should be very comforting, especially with interest rates starting to creep higher.
Earlier this year there was speculation that Microsoft would lose its exclusive status and be downgraded to AA as a result of $20 billion in debt added to its balance sheet to pay for LinkedIn, but Moody’s and Standard and Poor’s held fast.
Given how much work Nadella’s put into building Microsoft’s cloud business, its new-found growth should help repay much of the new borrowings over the next 3-5 years, keeping its AAA rating very much intact.
Repatriation of Foreign Cash
Although I’m not a fan of giving big corporations huge tax windfalls like the one-time 10% repatriation tax Trump has proposed (primarily because George W. Bush tried it in 2004 and it didn’t work), the fact remains that, if it happens, Microsoft has $124 billion reasons to be thankful.
Bottom Line on MSFT Stock
Up 23% year-to-date through Sept. 19, Microsoft’s stock is working on its third-best annual return in the past decade — a sign that growth is back.
Add to this a dividend that’s increased by double digits in most years since 2007 and you’ve got a stock that’s hard to ignore.
Yes, Microsoft’s got some issues, but certainly not anything to keep shareholders up at night.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
