May 18, 2024

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International Business Machines (NYSE:IBM) Will Pay A Larger Dividend Than Last Year At $1.67

3 min read

International Business Machines Corporation’s (NYSE:IBM) dividend will be increasing from last year’s payment of the same period to $1.67 on 10th of June. This makes the dividend yield 4.0%, which is above the industry average.

Check out our latest analysis for International Business Machines

International Business Machines’ Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, International Business Machines’ dividend made up quite a large proportion of earnings but only 49% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 10.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which is in the range that makes us comfortable with the sustainability of the dividend.

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International Business Machines Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $3.80 in 2014 to the most recent total annual payment of $6.68. This means that it has been growing its distributions at 5.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, initial appearances might be deceiving. International Business Machines hasn’t seen much change in its earnings per share over the last five years.

Our Thoughts On International Business Machines’ Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we’ve picked out 1 warning sign for International Business Machines that investors should take into consideration. Is International Business Machines not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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