Investors looking for a mix of growth and dividends should take a closer look at the tech sector. In particular, Microsoft (MSFT) has been one of the market’s best-performing tech stocks. It now has a market cap of $1.6 trillion, and the stock is a favorite of multiple professional asset managers such as Owl Creek Asset Management, a New York-based hedge fund that has had great success and generated strong returns for investors.

Everyday retail investors can learn a great deal from studying the holdings of some of the world’s top asset managers. While investors should never blindly follow any investment strategy, there are multiple valuable insights that can be learned by taking a look at the holdings of institutional investors.

Several growth stocks in the Owl Creek portfolio have appeal for investors interested in buying shares of companies seeing rapid growth, that have the potential for strong returns through capital appreciation. But one stock stands out as a particularly compelling stock for investors, as it offers a unique combination of growth and dividends: Microsoft.

Growth In A Difficult Climate

Microsoft develops, manufactures, and sells both software and hardware to businesses and consumers. Its offerings include operating systems, business software, software development tools, video games and gaming hardware, and cloud services. Microsoft’s market capitalization is now $1.6 trillion, compared with annual underlying earnings power of ~$40 billion.

Microsoft operates arguably the most diversified tech portfolio in the market, having delivered tremendous returns over the past few years. Being a staple holding in virtually every portfolio, it makes sense that Owl Creek wouldn’t want to miss on such a high-quality company. Microsoft reported earnings earlier this week, scoring an all-time high revenue figure of $38 billion (+12.8% Y/Y) and an income of $11.2 billion (+ 5% Y/Y), impressing investors once again. Revenue increased 15% in constant currency, led by 19% growth in the company’s Intelligent Cloud operating segment.

Commercial cloud revenue increased 32% year-over-year, reaching $14.3 billion for the quarter. Microsoft’s cloud offerings such as Office 365, Dynamics 365, and Azure continue to see strong demand.

The company’s results were particularly impressive, in that Microsoft was able to generate growth in the middle of the coronavirus pandemic. While traditional licensing transactions is challenged by the economic downturn, and subsidiary LinkedIn is struggling from elevated unemployment, Microsoft continues to see particularly strong growth in cloud services and gaming.

Dividend Growth Gem

Microsoft is also an attractive stock for dividend growth investors. The company has increased its dividend for over 10 years in a row and currently yields 1%. Investors can expect dividend increases to continue for many years, thanks to the company’s strong growth in revenue and earnings. Microsoft’s dividend payout ratio has never risen substantially above 50%, and the fact that Microsoft owns one of the strongest balance sheets in the world means that the dividend is very safe.

Microsoft has a huge economic moat in the operating system & Office business units and a strong market position in cloud computing. It is unlikely that the company will lose market share with its older, established products, whereas cloud computing is such a high-growth industry that there is enough room for growth for multiple companies. Microsoft has a renowned brand and a global presence, which provides competitive advantages. The company is relatively resilient against recessions, and its AAA-rated balance sheet makes it a strong pick for investors looking for growth and income.