MSFT - IBM: Quantum Computing Growth And Dividends

2024-07-06 04:40:04 ET

Summary

• IBM has struggled with growth for over a decade, focusing on share buybacks instead of research and development.
• The primary business areas for IBM are hybrid and cloud software solutions, consulting, and computing infrastructure.
• Despite recent growth in the last 3 years, IBM's balance sheet shows high levels of debt and limited room for error.
• However, with the owner earnings yield at 7.1% and a dividend of 3.8% [FWD], the stock finally looks compelling under Arvind Krishna's leadership.

How long has it been since we've seen growth from IBM?

International Business Machines ( IBM ) is a stock I've been in for as long as I have been investing, a little over a decade. I stubbornly followed Warren Buffett into the stock when Ginni Rometty was serving as CEO and their massive buyback program helped give IBM the appearance that they were generating huge returns on equity as the share count plummeted.

Pretty much an entire decade-plus was spent on buying back shares as IBM thought they had such an infallible, "sticky" business that would no longer need the massive research and development spend that the competition was expensing and hurting their own GAAP profits. Sacrificing today for a brighter tomorrow is the piston that drove the new hyper-scaler Mag 7 companies, IBM, fell behind....

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