IBM’s dividends still peak investor interest


According to economic correspondents along with analysts, investors consider shares of the International Business Machines Corporation (NYSE-IBM) to be a speculative stock title with the so-called aristocratic dividend, which for several years has maintained a reactive high level of quarterly-paid dividends. As of 24 October, 2019 the current annual dividend yield was   4.83% with a dividend worth US$ 6.48 per share. On the trading day of 24 October, 2019, at the NYSE (New York Stock Exchange) these stocks closed trading at a price of US$ 134.07 per share with a daily drop of -0.23 % of its price.

The International Business Machines Corporation (NYSE-IBM), nicknamed Big Blue, was founded 106 years ago in New York on 16 June, 1911 and has become the world’s leading information technology manufacturer. Its main activities now include the production and sale of computer software, hardware and related services. On 12 August, 1981, IBM released IBM PC (PC – Personal Computer) that competed with Commodore, Atari, Apple and others. IBM PCs quickly became the most widespread type of microcomputer of the time in the consumer electronics market, and after the International Business Machines Corporation (NYSE-IBM) published technical documentation of their computer’s manufacturing processes, there was a very rapid increase in competing brands in a very short producing microcomputers. The success of the International Business Machines Corporation (NYSE-IBM) computers was mainly due to their low cost and high degree of compatibility. In 2007, the company achieved a total turnover of US$ 98.8 billion with an operating profit of US$ 41.7 billion.

The current economic situation of the company, according to the reported data, represents a decline in revenue, but the International Business Machines Corporation (NYSE-IBM) shows an interesting revenue growth in the cloud operations. Cloud software, which includes Red Hat, grew by 6.4% to US$ 5.3 billion. However, total revenue declined by 4% to US$ 18 billion. The IBM Corp. is not losing money, but is now selling barely 1.5 times the annual income despite a dividend that is worth twice than the yield on a 30-year US bond. On the assumption of a “yield trap”, shares rose by about US$ 10 compared to the previous year, analysts say. However, since the beginning of this year  the price of NYSE-IBM shares has already increased by +17.95%. The IBM Corp. now has a debt of US$ 66.3 billion.

The IBM Corp. spent US$ 34 billion on the purchase of Red Hat and suspended share repurchases that prevented a price drop of NYSE-IBM shares. Currently, the cash flow of the IBM Corporation (NYSE-IBM) has fallen to US $ 11 billion. The dividends cost the IBM Corp. US$ 1.4 billion for the quarter, but generated US$ 1.8 billion in free cash flow this quarter. According to the analysts and financial strategists, the share price can be expected to grow in a medium-term investment horizon, with the average target share price set at US$ 151.29 per share.