Today I bought shares of Microsoft (MSFT), the world's largest software maker. This is my second purchase of MSFT, with the first purchase occurring in January. For reasons discussed in my earlier post, I still consider MSFT to be undervalued by at least 20%, so I decided to take advantage of the opportunity in front of me and increase my position.
I bought 60 shares of MSFT at the price of $27.45 per share, giving me a 3.34% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $13.80, which will add a total of $55.20 to my annual dividend income. The stock went ex-dividend earlier this week, so I will not receive the next dividend payment, but the lower cost basis -- relative to where the stock was trading the day before the ex-dividend date -- more than compensates for the missed dividend. This purchase was made in my Roth IRA, so dividends and capital gains will not be taxed. When the positions in my taxable account and Roth IRA are considered together, I now have 115 shares of MSFT and will receive combined quarterly dividends of $26.45. My forward 12-month dividend total is now $2,278.
MSFT is the first stock in my Roth IRA, where I require a minimum dividend yield of 3%. The purchase used about one-third of the cash in that account, so I have cash remaining for two more similar-sized purchases. The broad market decline during the past two days has created some buying opportunities that are tempting me, so I might make another purchase soon. Even though INTC had a nice drop today, I do not plan to buy more tech stocks for a while, given that my MSFT and INTC positions together make up 9% of my portfolio. However, I am confident that I can find good opportunities in other sectors.