The Fed just lowered interest rates. Here are my top growth stocks you can buy right now.

Microsoft (NASDAQ: MSFT) is the world’s second most valuable company, has rewarded long-term shareholders with monstrous profits, and is one of the leading players in two disruptive trends – cloud infrastructure and artificial intelligence (AI) integration with software. So it’s not necessarily a company that needs lower interest rates to thrive.

However, lower interest rates could help Microsoft in many ways. Here’s why it stands out as my top growth stock to buy right now.

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Accelerating growth

Microsoft has made a number of multi-billion dollar acquisitions. It completed its $69 billion acquisition of Activision Blizzard in October 2023, and acquired GitHub in 2018 and LinkedIn in 2016, among others. It also invested an estimated $13 billion in OpenAI, which has played a key role in helping Microsoft rapidly integrate generative artificial intelligence intelligence across her business, from cloud infrastructure to Copilot for Office 365 to GitHub.

Its capital expenditure has increased rapidly in recent years, but research and development expenses have grown at a slower pace than revenues. Lower interest rates will lower borrowing costs and allow Microsoft to accelerate growth organically or through acquisitions. Unlike some conglomerates, Microsoft doesn’t rely solely on buying up competitors to grow. It is a highly innovative company where the best achievements are created within the company. It used the takeovers as an additional shock, not as a main source of power.

Microsoft rewards its shareholders

Lower interest rates allow companies to refinance debt and reduce interest expenses. Fortunately for Microsoft, it has more cash, cash equivalents and marketable securities than debt on its balance sheet, which leaves room for shareholder value returns.

On September 16, Microsoft announced a 10% dividend increase, increasing the quarterly payout to $0.83 per share. It also announced a new share repurchase program worth up to $60 billion. It’s worth understanding that the repurchase program does not mean that Microsoft plans to repurchase $60 billion worth of stock within a year, but rather that management has authorized Microsoft to purchase up to that amount – which will likely occur over many years. By comparison, Microsoft spent $15.3 billion on buybacks and $21.8 billion on dividends in its last fiscal year.

Even after taking into account the dividend increase, Microsoft’s profitability is just 0.8%. The low profitability is due to the strong performance of share prices, not the lack of price increases (stocks have tripled in five years). In fact, Microsoft has increased its dividend every year since fiscal year 2011. The dividend has doubled in the last six years and more than tripled in the last 10 years.

A runway for future dividend increases

Microsoft has undergone several transformations in its almost 50-year history. However, it may now be undergoing its biggest transformation yet – at least from an investment perspective.

Microsoft has never had more opportunities to grow, from legacy consumer and enterprise software business units to cloud, artificial intelligence and beyond. Yet it still has plenty of cash to support one of the world’s largest capital return programs without compromising its balance sheet.

Microsoft has emerged as a well-rounded dividend stock that can reward investors even if the share price declines. If Microsoft continues to raise its dividend at around 10% annually, profitability will increase if share prices rise by less. And if the stock price increases by more than 10%, investors will likely be happy with the capital gains and won’t mind the lower rate of return.

It’s also worth understanding the difference between yield and cost profit. If you buy a share of Microsoft today, the yield is 0.8% (current dividend divided by current stock price). However, investors who bought Microsoft five years ago for 3 times less achieve a return on costs of 2.4%, or 3 times the current rate of return.

This is a concept that Warren Buffett has discussed many times Berkshire Hathaway annual shareholder meetings – often through the prism Coca-Cola AND American Express – which Berkshire bought decades ago. Since then, both companies have grown so much (while steadily increasing dividend payments) that Berkshire has earned far more in dividends over the years than it paid for its investments.

So if Microsoft’s dividend doubles again over the next six years, investors who buy the stock today would see a return twice the current rate, not to mention the potential gains from a higher share price.

Microsoft deserves the highest level ever

Microsoft stands out as a well-rounded investment that is on track to become a passive income powerhouse thanks to consistent and significant dividend increases. Its valuation is higher than historical levels, but the company is probably of higher quality today than a few years ago – therefore it deserves a higher valuation.

Buying shares at record highs is never easy, but Microsoft has what it takes to hit a new gear of growth in the coming years. Investors should pay attention to how the company balances capital spending and internal investment, and whether it decides to make a snap takeover. The right moves can fuel already hot growth and set the stage for lasting gains for patient investors.

Is it worth investing $1,000 in Microsoft now?

Before you buy Microsoft stock, consider the following:

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American Express is an advertising partner of The Ascent, a Motley Fool company. Daniel Foelber has no position in any of the companies mentioned. The Motley Fool covers and recommends Berkshire Hathaway and Microsoft. The Motley Fool recommends the following options: long $395 calls to Microsoft in January 2026 and short $405 calls to Microsoft in January 2026. The Motley Fool has a disclosure policy.