Shares opened significantly lower on Wednesday as investors analyzed an onslaught of corporate earnings updates.
quarterly results out Microsoft (MSFT (opens in new tab), -0.6%) attracted the most attention as it is the first of the big tech giants on the earnings calendar. Late Tuesday, the software maker reported top and bottom line beats for the last three months of 2022, which initially sent MSFT stock higher in after-hours trading. However, a closer look at the company’s guidance sent shares – and the broader market – lower in today’s trading.
Digging into the numbers, Microsoft reported earnings of $2.32 per share for the fiscal second quarter, down 6.5% year over year. Revenue of $52.8 billion was up 2% from the year-ago period, despite the slowest revenue growth since June 2016. Additionally, Azure cloud revenue increased 31% year over year.
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“It’s no secret that cloud is at the heart of the business right now [and] Azure has exceeded growth expectations,” said David Wagner, portfolio manager at Aptus Capital Advisors. “Everyone knows that Azure’s growth is slowing down. Investors just want to see it slow down less than expected. And that’s what happened this quarter.”
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However, on the company’s conference call with analysts, Chief Financial Officer Amy Hood said MSFT expects the slowing “business trends that we saw in late December” to have likely continued into the fiscal third quarter as corporate spending slows.
“The celebrations brought to Microsoft by the market ended when the company’s CFO issued her words of caution,” said Quincy Krosby, chief global strategist at LPL Financial. “It has been said so many times that company guidance during this fourth quarter earnings season is critical to understanding the direction of the market, especially against the backdrop of weaker economic data.”
And for today this direction was mostly lower. As stocks closed well behind their lows, Nasdaq Composite ended the day down 0.2% at 11,313 and the S&P500 declined 0.02% to 4,016. the Dow Jones industry averagehowever, managed to squeeze a marginal gain to 33,743.
The latest Dividend Aristocrats
It was a big day for staunch supporters of the Dividend Aristocrats — an illustrious group of S&P 500 constituents that have increased their dividends at least 25 straight years. Standard & Poor’s annual rebalancing of the S&P 500 Dividend Aristocrats resulted in three new members taking effect ahead of the market’s Feb. 1 open, including well-known consumer staples stocks JM Smucker (SJM (opens in new tab)).
While this announcement is certainly welcome news for income seekers, investors of all stripes should focus on dividend-paying stocks — especially in today’s volatile markets. “Dividend income, an important element of total return, is often overlooked in the face of volatility in the stock market,” said John Eade, president and director of Portfolio Strategies, and Jim Kelleher, director of research at Argus. And dividend growth stocks in particular “tend to hold their value better in times of rising interest rates and deliver solid total returns across markets.” With that in mind, here are the top dividend stocks investors can count on for dividend growth.