Microsoft Has Raised Its Dividend Every Year for More Than a Decade. History Provides Clues of How Big This Year's Raise Might Be.

Microsoft (NASDAQ:MSFT) will send its shareholders their next dividend payment ($0.91 per share, declared on June 10) on Sept. 10. For most dividend stocks, that would be the least interesting data point of the month, because the payment arrives right at the time of year when the board has historically announced its annual increase. The latter is likely what dividend investors will care about more.

The software giant has raised its dividend every year for more than a decade -- 16 consecutive annual increases, all announced in September. The most recent came on Sept. 15, 2025, when the board brought the quarterly payment from $0.83 to $0.91 -- an increase of just under 10%.

That track record is steady enough to support a real forecast. So let's make one.

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A raise in the same band year after year

Microsoft's dividend growth has been strikingly stable.

The last six annual increases were 9.8%, 10.7%, 9.7%, 10.3%, 10.7%, and 9.6% -- all within a band between 9.6% and 10.7%. And a longer window barely changes the story. The quarterly payment has grown from $0.36 at the end of 2015 to $0.91 at the end of 2025, which equates to about a 9.7% annual compound rate over that decade.

Apply that band to the current payment of $0.91, and the next quarterly dividend lands between about $1.00 and $1.01.

So the answer from history is specific. Expect about $1.00 per quarter, or $4.00 a year, which would be an increase of about 10%, likely announced in September. Of course, the calendar is a pattern, not a promise. Microsoft has not scheduled or confirmed anything, and a board can always go off script.

Can the spending surge bend the pattern?

The reasonable concern is Microsoft's capital expenditures. The company allocated $115.9 billion to property and equipment in fiscal 2026 (the year ended June 30) -- an 80% jump from last year as it builds artificial intelligence (AI) data center capacity.

All that construction eats into the cash that would otherwise accumulate. Despite a 34% rise to $182.9 billion in operating cash flow, only about $67 billion in free cash flow remained after capital expenditures -- compared with about $72 billion a year earlier.

The earnings underlying the payment, however, are growing much faster than the payment itself. Fiscal 2026 revenue grew 18% to $331.8 billion, and Azure revenue crossed $100 billion for the year while rising 41%. The company's net income of $133.7 billion, meanwhile, came in 31% above the prior year.

A dividend that grows 10% a year while earnings grow at rates like those becomes safer each year, not riskier.

Now consider what the dividend actually costs. At $0.91 per quarter across about 7.4 billion shares, Microsoft pays out about $27 billion a year. That's about 15% of operating cash flow, and about 20% of the $17.95 per share the company earned in fiscal 2026. And a 10% increase adds something like $2.7 billion a year to the tab -- manageable but still meaningful.

Still, the AI spending surge is squeezing Microsoft's free cash flow, and even the squeezed figure still covers the dividend more than twice over.

The only unknown is the size

If anything bends this September's figure, I would expect it to bend toward the lower end of the band and not below it. With data center construction of that scale still underway, boards tend to protect flexibility. An increase near 9% or 10% preserves the streak and is easy to fund.

Could the board surprise with something larger? Yes, it has room. But nothing in its behavior for a decade suggests it wants to grab headlines with the dividend, and I don't expect it to start now.

The dividend yield will remain small either way. At about $505 per share, Microsoft yields about 0.7%, and an extra dime per quarter doesn't change that.

The increase, assuming one occurs, matters for what it signals, which is a payment that grows through every cycle -- AI construction included.

So what will this year's raise amount to? I expect a move to about $1.00 per quarter, announced in September, in the same band as the last six. For investors who own Microsoft, the most important thing to watch is free cash flow. The dividend is easily affordable today. Whether it remains so depends on a data center bill that's still rising.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.