The rise of social media platform Facebook (FB) has been nothing short of astonishing. The stock has doubled in just the past three years.
It has already claimed a market capitalization of nearly $400 billion, despite the fact it only went public five years ago.
That said, whether the stock is a good investment today is a different question entirely.
Facebook has had an amazing run so far. But for income investors, the choice is clear: Microsoft (MSFT) is a better stock to buy.
Microsoft is a Dividend Achiever, a group of 272 stocks with 10+ years of consecutive dividend increases.
This article will discuss the top 4 reasons why I’d own Microsoft rather than Facebook.
Reason #1: Need vs. Want
Microsoft’s core products—specifically, software like Office, Windows, and cloud-based 365 and Azure—are very ‘sticky’.
Consumers need this software, both at work and at home, to conduct their daily lives.
Microsoft has evolved along with changes in how consumers perform work tasks. For example, it has built a large business segment devoted to the Intelligent Cloud.
Source: 2Q FY17 Earnings Presentation, page 11
This segment posted 10% revenue growth in constant currencies last quarter, driven by increased demand for cloud services and servers.
And, its core Office products have transitioned well to the cloud, which is a major growth trend in personal computing.
Source: 2Q FY17 Earnings Presentation, page 9
Revenue from Microsoft’s cloud-based products, Office 365 and Azure, rose 47% and 93% last quarter, respectively.
By contrast, Facebook is used more as a matter of choice, rather than necessity.
This gives Microsoft a competitive advantage, that Facebook may not have—the ability to withstand the test of time.
Reason #2: The Test of Time
Social media has proven to be a volatile arena so far. Over the years, many social media platforms have come and gone.
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