IBM (IBM) Stock Analysis
IBM (IBM) has paid a dividend since 1913 and increased its dividend for 22 consecutive years; qualifying the company as a Dividend Contender .
Dividend Yield: 3.8%
Current Dividend: $6.00
Cash Flow From Operations (CFO) Per Share (ttm): $17.84
Free Cash Flow Per Share (ttm): $14.31
Market Capitalization: $144 B
Enterprise Value: $176 B
Dividend Analyzer Checklist
(updated January 2018)
Dividend Safety Score (18/33 points)
Dividend Payout Ratio (ttm): 96%
Cash Dividend Payout Ratio (ttm): 41% (9/12 points)
Net Financial Debt: $34111 M
Total Assets: $121636 M
Net Financial Debt / Total Assets: 28% (5/12 points)
Net Financial Debt to EBITDA (ttm): 257%
Piotroski Score (1-9) (TTM): (4/9 points)
Profitability Score (16/33 points)
Operating Earnings Yield (ttm): 7.8% (8/15 points)
Net Income (ttm): $11307 M
Gross Profit (ttm): $36259 M
Total Assets: $121636 M
Gross Profitability Ratio = GP / Total Assets: 30% (8/18 points)
Cash Return On Invested Capital (CROIC)(tttm): 18%
Return on Invested Capital (ROIC): 18%
Valuation Score (26/34 points)
Free Cash Flow Yield (ttm): 8.8% (17/17 points)
EV to EBIT (ttm): 15.4
EV to EBITDA (ttm): 11.2 (9/17 points)
Price to Sales Ratio (ttm): 1.8
Price to Book Value (ttm): 7.2
Price to Earnings Ratio (P/E) (ttm): 13
PE 10: 13
TOTAL POINTS – (60/100) (50 is an average score)
Earnings Report: 1/19/18
Next Earnings Report: 4/18/18
Stay Updated All the Time!
DVB Analyzer Bundle: Dividend Analyzer Newsletter & Dividend Sortable Excel Spreadsheet
DVB Portfolio Bundle: Dividend Portfolio & Treasure Trove Twelve Newsletters
SPECIAL 4 For 1 Price: DVB Full Membership
Ranking & Recommendations
(updated January 2018)
IBM is ranked #75 (out of 371) overall and 6 (out of 20) in the Technology Sector by the Dividend Analyzer.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Should Be Considered
Looking For Exposure to Consumer Defensive Sector / Can Be Considered
Deep Value Investors / Can Be Considered
DVB Portfolio Stocks – None
AAAMP Global Value Portfolio – None
AAAMP Retirement Growth & Income Portfolio – Long
AAAMP Treasure Trove Twelve Portfolio – None
Industry: Information Technology Services
IBM is the largest Information Technology (IT) service company in the world. The company operates in more that 170 countries and benefits from many long term maintenance and outsourcing contracts that provide revenue stability.
The company is in the process of reinventing itself by shedding low older low margin businesses and investing heavily in big data. Business analytics, enterprise IT, cloud computing, mobile technologies, and security are all part of the new emphasis of the modern IBM.
Powerful analytics make data useful and the new “natural resource” of business. Enterprises of all types are seeking a competitive advantage by converting data into insights and actions that add value.
IBM is spending billions on research & development and acquisitions to move quickly into these growing segments. A major part of the core of this strategy is IBM Watson. IBM describes Watson as “a technology platform that uses natural language processing and machine learning to reveal insights from large amounts of unstructured data.
The business model is to use IBM’s global capabilities, expertise, and innovation to provide integrated services and solutions for customers. Their mission is to provide clients the technology (mobile, social, cloud, security, etc.) to interact, engage, and analyze data.
SWOT Analysis For IBM
Part of IBM’s moat is its long and successful customer relationships and revenues that are recurring or “annuity like”. This is providing the company the ability to transition its larger customer base from old lower margin businesses to new higher margin, higher growth products and services.
The company has been able to use its large free cash flow to invest heavily in the future (R&D and acquisitions) as well as buy back significant amounts of its own stock (approx. $115 billion and 34% of outstanding stock in last 10 years).
IBM’s old mainframe business is in a long term decline. Over the last 10 years the company’s Revenue growth is negative, Cash Flow from Operations (CFO) is barely positive, and Earnings Per Share (EPS) are only positive because they bought back so many shares.
Innovation and new products are a tradition at IBM. The company consistently tops the annual list of U.S. patent beneficiaries.
IBM’s long term customer relationships, stellar reputation for products and services, and ability to manage complex systems allow the company to gravitate to higher margin and higher value relationships.
The data and analytics businesses face fierce competition from small enterprises and large companies such as Amazon, Oracle, Cisco, and Intel.