Shares of Microsoft have steadily risen over the past five years, gaining nearly 150% in that time. This has pushed the dividend yield, which was around 3% in early 2013, down to about 2.1% today. That still beats out the 1.9% yield provided by the S&P 500, but just barely.

Not too long ago, Microsoft was highly dependent on selling on-premises software like Windows and Office. Under the leadership of CEO Satya Nadella, who took the reins in early 2014, the company has shifted hard toward cloud computing and subscription software. Microsoft's Azure platform, widely recognized as the No. 2 player in the public cloud infrastructure market behind Amazon Web Services, is nearly doubling revenue on a year-over-year basis. Office 365, the subscription version of Office, now has 26.2 million consumer subscribers, and the commercial version grew revenue by 45% year over year during the latest quarter.

Microsoft has also become an innovative hardware company. It's line of premium surface tablets and laptops have proven popular, and the Surface Hub, an interactive TV-like computer aimed at conference rooms, is reportedly seeing strong demand. HoloLens, Microsoft's augmented-reality headset, along with its Windows Mixed Reality platform, have the potential to redefine computing. The smartphone was the last great shift, and Microsoft completely missed the boat. Not this time.

Even as Microsoft continues to shift its business toward cloud computing, subscription software, and innovative hardware, the company is producing a tremendous amount of free cash flow that should fuel a growing dividend. Microsoft's free cash flow totaled about $25 billion in fiscal 2016, with just shy of 45% of that going toward the dividend. That leaves plenty of room for the dividend to increase faster than earnings.

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