Yahoo Finance International Business Machines Corporation (NYSE:IBM) Stock Goes Ex-Dividend In Just Two Days
International Business Machines Corporation (NYSE:IBM) is about to trade ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase International Business Machines' shares before the 9th of May in order to receive the dividend, which the company will pay on the 10th of June.
The company's next dividend payment will be US$1.67 per share. Last year, in total, the company distributed US$6.64 to shareholders. Based on the last year's worth of payments, International Business Machines stock has a trailing yield of around 4.0% on the current share price of US$165.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether International Business Machines has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for International Business Machines
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. International Business Machines paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that International Business Machines's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about International Business Machines's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. International Business Machines has delivered an average of 5.7% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
Is International Business Machines worth buying for its dividend? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, International Business Machines doesn't stand out from a dividend perspective. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
If you want to look further into International Business Machines, it's worth knowing the risks this business faces. To help with this, we've discovered 1 warning sign for International Business Machines that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
