Over the past 10 years International Business Machines Corporation (NYSE:IBM) has returned an average of 3.00% per year from dividend payouts. The stock currently pays out a dividend yield of 4.36%, and has a market cap of US$132.10b. Should it have a place in your portfolio? Let’s take a look at International Business Machines in more detail. Check out our latest analysis for International Business Machines
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does International Business Machines pass our checks?
The current trailing twelve-month payout ratio for IBM is 97.96%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 45.10%, leading to a dividend yield of around 4.40%. Furthermore, EPS should increase to $11.91, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of IBM it has increased its DPS from $2 to $6.28 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, International Business Machines generates a yield of 4.36%, which is high for IT stocks.
Considering the dividend attributes we analyzed above, International Business Machines is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for IBM’s future growth? Take a look at our free research report of analyst consensus for IBM’s outlook.
- Valuation: What is IBM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether IBM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.