Dividend Aristocrats In Focus: International Business Machines

Up to date on March sixth, 2025 by Felix Martinez

We overview every of the Dividend Aristocrats, the group of firms within the S&P 500 Index with 25+ consecutive years of dividend will increase, yearly.

To develop into a Dividend Aristocrat, an organization should possess sturdy aggressive benefits and a gentle enterprise mannequin that generates yearly income, even throughout recessions.

Nevertheless it should even have a shareholder-friendly administration staff devoted to sustaining constant dividend will increase every year.

We now have compiled an inventory of all 69 Dividend Aristocrats and vital monetary metrics reminiscent of price-to-earnings ratios and dividend yields. You’ll be able to obtain the total listing by clicking on the hyperlink under:

Disclaimer: Certain Dividend just isn’t affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official data.

Subsequent up within the Dividend Aristocrats In Focus sequence is Worldwide Enterprise Machines (IBM). IBM has elevated its dividends 30 years in a row.

Previously few years, IBM has turned itself round by investing in new areas reminiscent of synthetic intelligence, knowledge, and cloud companies, which have returned the corporate to progress.

In flip, IBM shares have rallied 60% prior to now 12 months, far outpacing the S&P 500 Index efficiency. This text will focus on IBM’s present enterprise mannequin, future progress prospects, and whether or not we see the inventory as a purchase proper now.

Enterprise Overview

IBM focuses on operating mission-critical programs for big, multi-national prospects and governments. It sometimes supplies end-to-end options. IBM spun off Kyndryl, its managed infrastructure enterprise, in 2021 however continues to be one of many largest IT companies firms on the earth.

IBM now has 4 enterprise segments: Software program, Consulting, Infrastructure, and Financing. In 2024, its annual income was $62B.

IBM reported fourth-quarter and full-year outcomes on January twenty ninth, 2025. IBM’s fourth-quarter 2024 outcomes confirmed sturdy software program progress, led by Purple Hat, with generative AI contracts reaching $5 billion. CEO Arvind Krishna emphasised the corporate’s progress in innovation and profitability, projecting 5% income progress and $13.5 billion in free money move for 2025.

Quarterly income reached $17.6 billion, with software program up 10%, whereas consulting and infrastructure declined. Full-year income totaled $62.8 billion, with software program up 8%. Free money move exceeded expectations at $12.7 billion.

IBM ended the 12 months with $14.8 billion in money and $55 billion in debt. CFO James Kavanaugh highlighted sturdy profitability and money move, enabling continued funding and shareholder returns.

Supply: Investor Presentation

Development Prospects

IBM engineered a profitable turnaround prior to now few years, and there are indicators rising that IBM’s turnaround is gaining traction.

Its precedence is to develop into a pacesetter in synthetic intelligence and hybrid cloud options. It has invested aggressively in these areas, such because the $34 billion acquisition of Purple Hat in 2019.

IBM sees the hybrid cloud as a $1 trillion market and its most important alternative to return to progress sooner or later.

In 2023, IBM continued its behavior of steadily tuck-in acquisitions. It acquired software program firm Apptio for $4.6 billion, increasing its AI choices. The corporate adopted that up with the acquisitions of StreamSets and webMethods. Underneath the current CEO, IBM has acquired 30+ firms.

IBM forecasts income progress within the mid-single-digits and free money move of about $12 billion in 2024. We anticipate 4% annual EPS progress for IBM over the following 5 years.

Supply: Investor Presentation

Aggressive Benefits & Recession Efficiency

IBM enjoys significant aggressive benefits, primarily its trade management place and scale. Its aggressive power is its model, entrenched buyer relations, and intensive patent portfolio. IBM can be the market chief in mainframe computer systems, with 90% of the market and little competitors.

IBM receives combined opinions by way of recession efficiency. As a worldwide expertise firm, it’s uncovered to the fluctuations of the broader economic system.

For instance, in 2020, the corporate’s income and earnings-per-share declined as the worldwide economic system fell into recession because of the coronavirus pandemic.

That stated, IBM carried out comparatively nicely within the Nice Recession of 2008-2009. IBM’s efficiency throughout that recession is listed under:

• 2008 earnings-per-share: $8.93
• 2009 earnings-per-share: $10.01 (12% improve)
• 2010 earnings-per-share: $11.52 (15% improve)
• 2011 earnings-per-share: $13.06 (13% improve)

It’s spectacular that IBM grew its earnings-per-share every year through the Nice Recession. Furthermore, the dividend saved rising.

Whereas the corporate’s recession efficiency was much less sturdy in 2020, it remained extremely worthwhile, which allowed it to maintain its dividend improve streak alive.

Valuation & Anticipated Returns

Based mostly on our 2025 estimate of $10.79 in earnings per share and the present inventory worth of $251, IBM shares commerce at a price-to-earnings ratio of 23.3.

The inventory trades above our truthful worth P/E estimate of 15.0. A declining valuation a number of may cut back annual returns by 8.4% per 12 months over the following 5 years, so the inventory appears to be considerably overvalued proper now.

These damaging returns may very well be offset by earnings-per-share progress and dividends. As beforehand talked about, we anticipate 4% annual EPS progress by means of 2030.

As well as, the inventory has a present dividend yield of two.6%. Over the following 5 years, we estimate complete returns at -1.8% per 12 months.

The inventory worth has risen shortly because of higher efficiency and AI optimism, and it’s now almost a decade excessive. The low fee of return is because of the present overvaluation of the shares.

Ultimate Ideas

In 2021, IBM was inducted into the celebrated Dividend Aristocrats listing. Attributable to its regular progress and powerful free money move, IBM has continued to lift its dividend every year.

IBM’s monetary efficiency is enhancing, and the corporate is deleveraging. It ought to be capable to proceed elevating its dividend every year.

Attributable to its share worth rally over the previous 12 months, the inventory seems to be overvalued. The low anticipated returns make it a promote, in our view.

If you’re concerned with discovering high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases shall be helpful:

The key home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: