IBM Corporation Rewards Shareholders With 4.3% Quarterly Dividend Boost (IBM)
By: Ned Piplovic,
The International Business Machines Corporation (NYSE:IBM) has been distributing dividends for more than a century and announced its next quarterly dividend hike of 4.3% for its May 2018 dividend distribution, which marks the company’s 20th consecutive annual dividend boost.
The company’s share price experienced significant fluctuations and fell more than 30% from its all-time high of more than $213 in 2013. However, only a few other companies can match IBM’s long-term trend of share- price growth. IBM has gone through a significant transformation since 2005 when it sold its personal computer business to refocus its core competencies on cloud storage, Artificial Intelligence (AI) and data analytics in a transformation that has put IBM in a competitive position with its Technology sector peers.
While the 30% share price drop is a temporary asset loss for existing long-term shareholders, this price dip might be an opportunity for new investors to take a long position in the IBM stock at a discount, while collecting steadily increasing dividend income. The company will distribute its next dividend on June 10, 2018, to all its shareholders of record prior to the May 10, 2018, ex-dividend date.
International Business Machines Corporation (NYSE:IBM)
Headquartered in Armonk, New York, and formed in 1911 as the Computing-Tabulating-Recording Company, the International Business Machines Corporation assumed its current name in 1924 and operates as an integrated technology and services company worldwide. The company’s Cognitive Solutions segment offers Watson – a cognitive computing platform that interacts in natural language, processes big data and learns from interactions with people and computers. In addition to Watson, this segment also offers data analytics solutions and transaction processing software that runs mission-critical systems in banking, airlines and retail industries. The company’s Global Business Services segment offers business consulting services, application management services for packaged software applications, as well as finance, procurement, talent engagement and industry-specific business process outsourcing services.
Additionally, the Technology Services & Cloud Platforms segment provides cloud and outsourcing services, as well as technical support and integration software solutions. The company’s Systems segment offers servers, data storage products and the z/OS enterprise operating system. IBM’s Global Financing segment provides lease, installment payment plans, loan financing services and short-term working capital financing to suppliers, distributors and resellers, as well as remanufacturing and remarketing services.
The company’s share price has incurred a decline of approximately 30% over the past five years. Over the first three months of the trailing 12-month period, the share price dropped 12% towards its 52-week low of $139.70 on August 18, 2017. After the August low, the share price reversed its trend and rose more than 21% to reach its 52-week high of $169.12 on January 18, 2018. However, the share price gave back most of those gains to close on April 30, 2018 at $144.96, which was 14.3% below the January peak and 3.8% above the 52-week low from August 2018. The IBM share price has a long-term growth history and most investors use this characteristic to integrate the IBM stock into their own investment strategy. The chart below shows the share price movement and its upward trend over the past 25 years.
The company marked its 20th consecutive annual dividend hike with a 4.7% quarterly dividend increase from $1.50 in the last period to the current $1.57 payout. This new quarterly amount is equivalent to a $6.28 annualized dividend distribution and a 4.3% forward dividend yield. The share-price decline increased the company’s yield to nearly 40% above the company’s own 3.1% average yield over the past five years. Additionally, IBM’s current dividend yield is more than four-fold above the 1.08 simple average yield of the entire Technology sector, as well as 155% higher than the 1.73% average yield of the company’s peers in the Diversified Computer Systems industry segment.
Since starting its current streak of consecutive annual dividend hikes two decades ago, IBM has advanced its annual dividend amount more than 14-fold. That level of dividend growth corresponds to an average growth rate of 14.2% per year. Even over the past 10 years, the company managed to maintain a 12.7% annual growth rate and boosted its total annual dividend more than 230% since 2008.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.