Explore the sustainability and growth of IBM's dividend payments
International Business Machines Corp (NYSE:IBM) recently announced a dividend of $1.67 per share, payable on June 10, 2024, with an ex-dividend date of May 9, 2024. The company's dividend history, yield, and growth rate are also in focus as investors look forward to future payouts. Let's examine International Business Machines Corp's dividend history and assess its sustainability using data from GuruFocus.
What does International Business Machines Corp do?
IBM aims to be involved in all aspects of a company's IT needs. The company primarily sells software, IT services, consulting, and hardware. IBM operates in 175 countries and has approximately 350,000 employees. The company has a strong roster of 80,000 business partners serving 5,200 customers, including 95% of all Fortune 500 companies. Although IBM is his B2B company, IBM's external influence is significant. For example, IBM controls 90% of all credit card transactions worldwide and is responsible for 50% of all wireless connections worldwide.
A glimpse at International Business Machines Corp's dividend history
International Business Machines Corp has maintained a consistent dividend payment record since 1986. Dividends are currently distributed on a quarterly basis. International Business Machines Corp has increased its dividend every year since 1994. As such, the stock is listed as a Dividend Aristocrat, an honor bestowed on companies that have increased their dividends every year for at least the past 30 years. Below is a graph showing annual dividends per share to track historical trends.
Analyzing International Business Machines Corp's dividend yield and growth rate
As of today, International Business Machines Corp's trailing 12-month dividend yield is 3.93% and its trailing 12-month dividend yield is 3.95%. This suggests that dividend increases are expected over the next 12 months. Over the past three years, International Business Machines Corp's annual dividend growth rate was 0.60%. When extended to a five-year period, this rate increased to 1.20% per year. Over the past 10 years, International Business Machines Corp's annual dividend growth rate per share has been 5.50%.
Based on International Business Machines Corp's dividend yield and 5-year growth rate, as of today, International Business Machines Corp stock has a 5-year cost yield of approximately 4.17%.
Questions about sustainability: Dividend payout ratio and profitability
To assess dividend sustainability, you need to evaluate a company's payout ratio. Dividend payout ratio helps determine the proportion of a company's profits that it distributes as dividends. A low ratio indicates that the company is retaining a significant portion of its earnings, thereby ensuring that it has funds for future growth or unexpected economic downturns. As of March 31, 2024, International Business Machines Corp's dividend payout ratio is 0.67.
International Business Machines Corp's Profitability Rank helps you understand the company's earning power compared to its peers. GuruFocus ranks International Business Machines Corp's profitability at 7 out of 10 as of March 31, 2024, suggesting a positive profitability outlook. The company has reported positive net income every year for the past 10 years, further cementing its strong profitability.
Growth indicators: future outlook
To ensure dividend sustainability, companies must have solid growth metrics. International Business Machines Corp's Growth Rank of 7 out of 10 indicates that the company's growth trajectory is favorable compared to its competitors.
Earnings are the lifeblood of any company, and International Business Machines Corp's earnings per share, combined with its 3-year earnings growth rate, suggest a strong earnings model. International Business Machines Corp's revenue grows at an average annual rate of around 2.90%, which is lower than around 65.33% of its global competitors.
The company's three-year EPS growth rate indicates its ability to grow earnings, which is a key factor in maintaining a dividend over the long term. Over the past three years, International Business Machines Corp's revenue has grown by an average of about 3.50% per year. This is a rate lower than approximately 59.84% of its global competitors.
Finally, the company’s 5-year EBITDA Growth rate is -8.00%, which is lower than around 81.72% of its global competitors.
next step
Considering International Business Machines Corp's consistent dividend payments, moderate growth in dividend rate, and stable payout ratio, the dividend appears sustainable in the short term. However, investors should always keep an eye on a company's growth metrics and profitability to ensure long-term sustainability. If you're interested in finding higher dividend yield opportunities, GuruFocus Premium users can use the High Dividend Yield Screener.
This article created by GuruFocus is intended to provide general insight and is not intended as financial advice. Our commentary is based on historical data and analyst forecasts using an unbiased methodology and is not intended to serve as specific investment guidance. It does not constitute a recommendation to buy or sell stocks, and does not take into account your individual investment objectives or financial situation. Our objective is to provide fundamental data-driven analysis over time. Please note that our analysis may not incorporate the latest announcements or qualitative information from price-sensitive companies. GuruFocus has no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
