Microsoft stock bounce paces the Dow’ s gainers, as Morgan Stanley sees dividend hike coming

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Shares of Microsoft Corp. surged 5.3% in midday trading Wednesday, enough to pace the Dow Jones Industrial Average’s gainers, after a bullish call from Morgan Stanley analyst Keith Weiss, who said he sees potential for a dividend hike in the coming weeks. The software giant’s stock is set to snap a 3-day losing streak in which it dropped 12.5% from its Sept. 2 record close of $231.65. Morgan Stanley’s Weiss reiterated his overweight rating and $245 stock price target. Weiss said Microsoft historically announces dividend increases in mid-September, and he sees potential for a 10+% increase, which would lead to the implied dividend yield returning to more than 1%. “Combined with mid-teens EPS growth, the supports [Microsoft’s] premium total return profile, a durable and attractive level in uncertain times,” Weiss wrote in a note to clients. The dividend yield at current prices is 0.96%, compared with the implied yield for the S&P 500 of 1.65%, according to FactSet. The stock has run up 35.3% year to date, while the Dow has slipped 1.6%.
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