International Business Machines Corporation (NYSE:IBM)’s dividend will be $1.67 on June 10, an increase from the same period paid last year. This results in a dividend yield of 4.0%, which is above the industry average.
Check out our latest analysis for International Business Machines.
International Business Machines’ earnings easily cover distributions
It’s great to have a high dividend yield, but you also need to consider whether the payments are sustainable. Prior to this announcement, International Business Machines’ dividends accounted for a significant portion of its profit, but only 49% of its free cash flow. This leaves you with enough cash to reinvest in your business.
EPS is expected to expand by 10.3% next year. If dividends continue in line with recent trends, the dividend payout ratio is expected to be 71%, which is within a sufficiently satisfactory range for dividend sustainability.
International Business Machines has a proven track record
The company has a consistent track record of paying dividends with little volatility. Dividends went from a total annual payment of $3.80 in 2014 to a total annual payment of $6.68 in the latest year. This means it has grown its distribution at a rate of 5.8% per year over that time. These companies can be very valuable over the long term if they can maintain a reasonable growth rate.
Dividend increases may be difficult to achieve
Some investors may be chomping at the bit to buy the company’s stock based on its dividend history. However, first appearances can be deceiving. International Business Machines’s earnings per share have not changed much over the past five years.
International Business Machines’ philosophy on dividends
All in all, this is a reasonable payout, and being increased is an added bonus. Earnings coverage is acceptable for now, but we will definitely keep an eye on the dividend payout ratio as earnings are on the decline. Considering all this, the dividend looks viable going forward, but investors should keep in mind that the company has pushed the boundaries of sustainability in the past and could do so again. there is.
It’s important to note that companies with a consistent dividend policy generate greater investor confidence than companies with an erratic dividend policy. However, there are other things investors should consider when analyzing stock performance. For example, we chose 1 warning sign for International Business Machines Investors should consider this. Is International Business Machines the opportunity you’ve been looking for? Why not check it out? Selection of high dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
