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IBM (IBM) Stock Analysis

by | Dividend Contenders

IBM Logo

IBM Dividend

(updated  12/11/2017)

IBM (IBM) has paid a dividend since 1913 and increased its dividend for 21 consecutive years; qualifying the company as a Dividend Contender .

Price: $155.44
Dividend Yield: 3.9%

Current Dividend: $6.00
Cash Flow From Operations (CFO) Per Share (ttm): $15.74
Free Cash Flow Per Share (ttm): $11.71

Market Capitalization: 144 B
Enterprise Value: 178 B

Dividend Analyzer Checklist

(updated November 2017)

Dividend Safety Score (18/33 points)

Dividend Payout Ratio (ttm): 48%
Cash Dividend Payout Ratio (ttm): 49%  (8/12 points) 
Net Financial Debt: $34111 M
Total Assets: $120495 M
Net Financial Debt / Total Assets: 28% (5/12 points)
Net Financial Debt to EBITDA (ttm): 257%
Piotroski Score (1-9) (TTM): (5/9 points)

 

Profitability Score (20/33 points)

Operating Earnings Yield (ttm): 8.4% (12/15 points)
Net Income (ttm): $11435 M
Gross Profit (ttm): $36472 M
Total Assets: $120495 M
Gross Profitability Ratio = GP / Total Assets: 30% (8/18 points)
Cash Return On Invested Capital (CROIC)(tttm): 19%
Return on Invested Capital (ROIC): 19%

Valuation Score (24/34 points)

Free Cash Flow Yield (ttm): 7.7% (15/17 points)
EV to EBIT (ttm):  14.1
EV to EBITDA (ttm):  10.4  (9/17 points)
PE10: 12.1 (6/7 points)
Price to Sales Ratio (ttm): 1.8
Price to Book Value (ttm): 7.3
Price to Earnings Ratio (P/E) (ttm):  13
PE 10: 18

TOTAL POINTS – (62/100) (50 is an average score)

Earnings Report: 10/17/17
Next Earnings Report: 1/19/18

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Ranking & Recommendations

(updated November 2017)

IBM is ranked #77 (out of 377) overall and 7 (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 / Watchlist

Company Description

Sector: Technology
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

Strengths

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).

Weaknesses

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.

Opportunities

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.

Threats

The data and analytics businesses face fierce competition from small enterprises and large companies such as Amazon, Oracle, Cisco, and Intel.

Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth Portfolio – None
DVB High Income Portfolio – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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