DGRO - Dividend Corner: Even with a 13% slide in 2023 does IBM represent a good dividend stock?

2023-05-17 10:23:29 ET

IBM has stumbled so far this year, with stagnant revenue growth and overall worries about the economy leading to a double-digit retreat in its stock price. However, many investors turn to Big Blue as dividend play, valuing its relatively high payout for a tech company and the company's decades-long track record.

Even with the headwinds it has faced in 2023, does IBM ( NYSE: IBM ) represent a strong dividend stock?

Shares of the Armonk, New York-headquartered tech stalwart have slumped 12.8% on the year. Lately, IBM has been pressured by its latest earnings report , which showed mixed results for the latest fiscal period.

Specifically, the company posted Q1 GAAP EPS of $1.36, which beat estimates by $0.69. At the same time, the firm also delivered sluggish revenue of $14.3B, a figure that rose less than 1% from last year.

But how does IBM look on the dividend front? Here are some details about the firm's dividend profile, as constructed by Seeking Alpha's Quant Rating system, which uses quantifiable measures to compare the stock to other similar investment opportunities:

IBM Dividend Yield:

Seeking Alpha’s Quant Ratings gave IBM an A+ when looking at the tech firm’s dividend yield -- which is exceptionally high for a tech firm. Currently, IBM holds a dividend yield of 5.38%, which is well above the sector median of 1.64%.

See below a breakdown of the stock's dividend yield grade :

IBM Dividend Growth:

As it relates to dividend growth, IBM received a B+ from the Quant Ratings. This came even as the company’s one-year dividend growth rate came in lower than the sector median.

Here's a breakdown of IBM’s dividend growth grade :

IBM Dividend Safety:

IBM received a B- from Seeking Alpha’s Quant grades, which was hurt by an unfavorable dividend payout ratio.

See a breakdown of IBM’s dividend safety grade :

IBM Dividend History:

When viewing the overall consistency of dividends, the tech company has provided decades of payments and growth. As such, IBM gets an A+ as it pertains to its dividend history.

See an outline of IBM’s dividend consistency grade :

What Others Say About IBM

Bill Maurer, a Seeking Alpha contributor, believes IBM is a Hold . However, the analyst specifically noted the firm's dividend as a draw for the stock. "When it comes to technology and service giant International Business Machines, one reason that investors love the stock is its dividend," Maurer stated.

At the same time, Zen Analyst, another SA contributor, takes a bearish view of the overall company, viewing IBM as a Sell amid the prospects that AI will put the company behind the curve in tech. "IBM's difficult history with AI, particularly in the healthcare sector, raises doubts about its capacity to effectively benefit from AI technology," the analyst noted.

Other Investing Options

For investors who remain uncertain about IBM, exchange traded funds can provide exposure to the company from a more diversified approach. IBM is currently owned by 306 ETFs. Outlined below are the five funds that have the most significant concentrations towards the tech giant (listed with IBM's weightings within the fund):

• First Trust NASDAQ Technology Dividend Index Fund ( TDIV ) at 6.98%.
• Invesco Dow Jones Industrial Average Dividend ETF ( DJD ) at 6.35%.
• VanEck Durable High Dividend ETF ( DURA ) at 4.82%.
• Democratic Large Cap Core ETF ( DEMZ ) at 4.27%.
• First Trust Morningstar Dividend Leaders Index Fund ( FDL ) at 3.82%.

Moreover, investors can also analyze some of IBM's closest competitors, which include the likes of Wipro Limited ( WIT ), CGI Inc. ( GIB ), Accenture ( CAN ) and Infosys ( INFY ).

Furthermore, for investors who are looking for broad exposure to dividends, there are many general dividend ETFs to consider as well. Some names include:

• Vanguard Dividend Appreciation ETF ( VIG )
• Vanguard High Dividend Yield Index ETF ( VYM )
• Schwab US Dividend Equity ETF ( SCHD )
• iShares Core Dividend Growth ETF ( DGRO )
• SPDR S&P Dividend ETF ( SDY )
• iShares Select Dividend ETF ( DVY )

For further analysis, see IBM’s complete dividend score card here.

For further details see: