Retirees tend to prioritize relatively stable and reliable investments that also provide a steady income. This doesn’t describe the top artificial intelligence (AI) companies, many of which are growth-oriented tech stocks that are fairly volatile and don’t have particularly impressive dividend programs (if they even have one at all). That said, there is one AI stock that is most appealing to retirees. It’s none other than microsoft (MSFT 0.59%). Here’s why:
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Bringing growth and income together
First, some reasons why Microsoft is a leading company in AI. The technology leader offers a number of AI services through its Azure platform, including tools that allow businesses to build custom AI tools without the expensive investments required to train AI models from scratch. It also helps that Microsoft already has a large distribution channel in place. Microsoft has been an integral part of the daily operations of millions of businesses for decades through its operating systems (OS) and productivity platforms. It’s not a leap for the company to rely on these existing relationships to advance its AI agenda.
In addition, Microsoft integrates AI tools into the OS through Copilot and also partners with OpenAI, which remains the market leader. But beyond the AI business, Microsoft’s large, established customer base, which uses Microsoft’s operating systems, productivity tools, and even cloud computing services every day, provides a significant and predictable revenue stream, much of it through enterprise contracts, resulting in recurring revenue. This is what makes Microsoft a better choice for retirees than other AI leaders that rely on advertising and e-commerce and are hit hard in a recession.
Today’s changes
(-0.59%) $-2.20
current price
$370.87
Key data points
Market capitalization
$2.8 trillion
daily range
$370.03 – $375.64
52 week range
$355.67 – $555.45
volume
28M
average volume
37M
gross profit
68.59%
dividend yield
0.94%
Microsoft won’t be able to escape the recession completely unaffected. Very few companies can achieve that. But the tech giant will have to weather it better than most of its similarly sized tech peers. Additionally, Microsoft has a great dividend program. Despite the company’s low yield of approximately 1% ( S&P500(on average 1.2%), Microsoft regularly increases its dividend, increasing by 153% over the past 10 years.
Microsoft is unlikely to cut its dividend, given the amount of free cash flow it generates ($77.4 billion over the past 12 months) and its very conservative cash payout ratio of 33.6%. That being said, how should retired investors approach Microsoft stock?Despite its strengths, the tech giant can be volatile, as evidenced by its significant decline in market value over the past six months. However, given the company’s strong underlying business and growth prospects from cloud computing and AI, it should eventually recover while maintaining its dividend program. Retirees looking to get some exposure to the AI industry might allocate a (very) small portion of their portfolio to Microsoft.
