If I could only buy and hold one stock, it would be this one

You've probably heard the saying, “You shouldn't put all your eggs in one basket.”

This is smart advice when investing because you never know what can happen, and you don't want an unfortunate event to destroy the money you've worked hard to earn. A diverse portfolio of high-quality companies can increase in value over time, but still protects you from a single bad egg spoiling the bunch.

But what if you could only hold one stock?

Technology giant Microsoft (MSFT 1.42%) would be my first answer. Five reasons make a compelling argument that every long-term investor should consider buying and holding Microsoft in their portfolio.

1. It's a diverse business

Diversification doesn't just affect your portfolio; Companies that make money in many ways are also more reliable. Microsoft is a giant technology company that sells various products and services across the technology sector. The Company primarily operates three business segments, including:

• Productivity and business processes
• Intelligent cloud
• More personal computing

But this only simplifies a sprawling business that touches many markets, including personal and enterprise software, computer operating systems, cloud computing, video games, artificial intelligence (AI), Internet search, social media and more. Aside from cell phones, Microsoft is pretty much everywhere there is technology.

2. Microsoft achieves a high return on invested capital

Companies evolve as the world around them changes. Microsoft has been successful for decades in the technology industry, an area where disruption through innovation is almost always a threat. How? The company has done an excellent job with its financial resources and created added value.

A company's return on invested capital (ROIC) shows how efficiently it uses its financial resources to generate earnings. A high ROIC combined with sustainable revenue growth is the formula for tremendous profit growth and investment returns. Microsoft has grown to over $254 billion in annual revenue and an average ROIC of 28% since 1989. That's why the stock has turned a mere $1,000 investment into more than $6.8 million today.

3. The company has a better credit rating than America

Every company stumbles at some point. A strong balance sheet can serve as a safety net and help cover gaps if sales or profits temporarily decline. Microsoft is one of only two listed companies with the highest credit rating, AAA Standard & Poor's Scale. The United States government currently has an AA+ rating, which to be fair is only slightly lower.

But isn't it remarkable that a company has achieved a better credit rating than arguably the most powerful country in the world? It's hard to find better financial security.

4. Microsoft pays its shareholders

Microsoft stock is known for its impressive stock price appreciation, but don't forget its dividend history. The company has paid and increased its dividend for 22 consecutive years, by an average of 11% per year over the past decade. The initial yield of the dividend will not excite you; it is only 0.7%. However, it all adds up. Microsoft's dividend contributes nearly 40% to the stock's total investment return.

Additionally, the dividend is only about a quarter of Microsoft's earnings estimates, leaving management plenty of room to further increase the dividend in the coming years.

5. Growth shouldn't stop anytime soon

Microsoft generates annual revenue of over $250 billion and has a market capitalization of $3 trillion. The company's ability to continue to grow at this size is perhaps the most impressive aspect of its business. In the first quarter of its fiscal year 2025, which ended September 30, 2024, the company reported year-over-year revenue growth of 16%. Microsoft's three divisions each grew double digits, so this is company-wide momentum.

AI could drive Microsoft's growth for the foreseeable future. Microsoft is expanding various areas of its business with AI technology, and the company's massive investments in data centers to support AI computing needs are shifting the business to its cloud platform Azure. The world is becoming more and more technological. Given Microsoft's large shadow in the broader technology landscape, I wouldn't be surprised to see the company continue to grow in the future.