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Microsoft Corporation (MSFT), C.H. Robinson Worldwide, Inc. (CHRW): Two Stocks With Wide Moats for Income Investors

Microsoft Corporation (NASDAQ:MSFT)Recently, Morningstar’s Senior Stock Analyst Greggory Warren shared a list of 10 high-conviction stocks that have been bought by “ultimate stock pickers.” In that list of 10 stocks, I noticed two stocks which are considered to have wide moats — Microsoft Corporation (NASDAQ:MSFT) and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW).

Microsoft – decent yield and huge R&D spending

Microsoft Corporation (NASDAQ:MSFT) still seems to be cheap at its current levels. It is trading at around $35 per share with a total market cap of $291 billion. The market values Microsoft Corporation (NASDAQ:MSFT) at around 11.35 times its forward earnings. Microsoft has been a good stock for income investors. In the past ten years, it has kept increasing its dividend payments, from $0.08 per share in 2003 to $0.76 per share in 2012. Interestingly, the dividend payout ratio was quite reasonable at around 38% in 2012. At the current trading price, investors could get a decent dividend yield of 2.60%.

What I like about Microsoft Corporation (NASDAQ:MSFT) is its high R&D investment. Since 2003, its R&D expenses have increased from $4.67 billion to more than $9.80 billion. In 2012, R&D spending accounted for 13.3% of the total revenue. Apple Inc. (NASDAQ:AAPL) has also been spending an increasing amount of money in R&D, from $471 million to nearly $3.4 billion during the same period. However, because of much higher revenue growth, Apple Inc. (NASDAQ:AAPL)’s R&D expenses as a percentage of total revenue have been quite low. In 2012, R&D spending represented only 2.16% of Apple Inc. (NASDAQ:AAPL)’s revenue.

Focus on Microsoft Business Division

Many people are worried about the fast declining global PC industry and its impact on Microsoft Corporation (NASDAQ:MSFT). Interestingly, the biggest revenue contributor of Microsoft is not the Windows Division, which is positively correlated to the global PC market growth, instead, it is the Microsoft Business Division.

In the nine months ended March 2013, the Microsoft Corporation (NASDAQ:MSFT) Business Division has generated $18.3 billion in revenue while the Windows Division ranked second with $14.3 billion in sales. What makes me excited is that the Microsoft Business Division was also the biggest profit generator, with more than $12.1 billion in profit, 54% higher than $7.85 billion in profit from the Windows Division. Indeed, the Microsoft Business Division should be the segment that Microsoft should really focus on.