While Microsoft rose 2%, Twilio and Splunk rose 1.7% and 2.5%, respectively.
Microsoft’s board approves $40 billion buyback
Currently, Microsoft shares are trading at $141.25, which is close to its all-time high. The company increased its quarterly dividend 10.9% to $0.51 per share—up from $0.46. Microsoft has a dividend yield of 1.5%.
The company has increased its dividend payments for 15 consecutive years. Microsoft has a payout ratio of 48%. Notably, the company has increased dividends at an annual rate of 10.3% in the last three years. Microsoft also announced a share buyback program amounting to $40 billion.
Microsoft’s strong free cash flow metrics allow it to increase shareholder value through dividend payments and buybacks. The company repurchased shares worth $42 billion between 2017 and 2019.
Microsoft’s value is $1.09 trillion by market cap. The company’s earnings will likely grow at an annual rate of 14.5% in the next five years. The stock is trading at a forward PE ratio of 24x. Overall, the ratio indicates that Microsoft is overvalued even after accounting for its dividend yield.
Analysts have a 12-month average target price of $154.71, which indicates an upside potential of 9.5% from the current price.
According to a report from The Street, Morgan Stanley analyst Meta Marshall said that Twilio’s “depth of platform and (overall market share) position should help them outgrow this market.” He said that the stock has “a meaningful runway for growth that is being missed in recent pullback.”
Twilio is a high growth company. Notably, Twilio gained more than 75% between January and July. The recent sell-off drove the shares lower, which makes the company an attractive investment.
Analysts have a 12-month average target price of $150.52 for Twilio. The target price indicates an upside potential of 31.3% from the current price.
Splunk (SPLK) shares are trading at $121.61, which is 15.6% below its 52-week high. The stock fell more than 23% between July 13 and September 3. We identified Splunk as an attractive pick due to its high growth metrics.
Splunk shares have gained more than 12% since September 3. Recently, JPMorgan Chase analyst Mark Murphy upgraded Splunk from “overweight” to “neutral.”
According to a MarketWatch report, Murphy said, “We see potential for multiple expansion as investors start to view Splunk as a recurring/renewable revenue business at scale, aligned to data growth, with a strong competitive position and brand.”
Analysts have a 12-month average target price of $150 for Splunk, which indicates an upside potential of 24% from the current price.
While Microsoft has risen 41% in 2019, Twilio and Splunk have returned 30% and 16%, respectively, year-to-date.