Recently, I decided add to my position in IBM. The stock currently trades near my cost basis and I still believe the risk/reward profile of the franchise is still compelling. Here the details of the purchase:
Purchased: 10 shares x $154.05 = $1,540.50 (+$4.95 commission)
Dividend Income: $60.00 ($6.00/sh annually; paid quarterly in Mar, Jun, Sep, and Dec)
P/E ratio: 12.7 (vs. S&P @ 22.7)
Debt to capital < 50%: No, ~69.9%
Interest coverage ratio of at least 3:1: Yes, 20.6x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, A+
Current dividend yield > 1.5x S&P yield: Yes, 3.9% vs. S&P @ 1.9%
Payout ratio < 60% (or <85% for utilities): Yes, 50.1%
Comments: Morningstar.com lists the Forward P/E at 10.9 and current Price/Cash Flow at 9.7. As noted in the company's recent quarterly results for Q3 2017 found here, the company continues to make progress towards the strategic imperatives, albeit at a much slower pace than was originally anticipated based on expectations management set for investors several years ago that have since been revised.
Company Profile
International Business Machines Corporation provides information technology (IT) products and services worldwide. Its Cognitive Solutions segment includes Watson, a cognitive computing platform that interacts in natural language, processes big data, and learns from interactions with people and computers. The company's Cognitive Solutions segment also offers data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry; and transaction processing software that runs mission-critical systems in banking, airlines, and retail industries. The company's Global Business Services segment offers business consulting services; delivers system integration, application management, maintenance, and support services for packaged software applications; and business process outsourcing services. Its Technology Services & Cloud Platforms segment provides cloud, project-based, outsourcing, and other managed services for enterprise IT infrastructure environments. This segment also offers technical support, and software and solution support; and integration software solutions. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system for z systems. Its Global Financing segment provides lease, installment payment plans, and loan financing services; short-term inventory and accounts receivable financing to suppliers, distributors, and remarketers; and remanufacturing and remarketing services. It has a strategic collaboration with ABB Ltd to develop industrial artificial intelligence solutions. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York.
Purchased: 10 shares x $154.05 = $1,540.50 (+$4.95 commission)
Dividend Income: $60.00 ($6.00/sh annually; paid quarterly in Mar, Jun, Sep, and Dec)
P/E ratio: 12.7 (vs. S&P @ 22.7)
Debt to capital < 50%: No, ~69.9%
Interest coverage ratio of at least 3:1: Yes, 20.6x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, A+
Current dividend yield > 1.5x S&P yield: Yes, 3.9% vs. S&P @ 1.9%
Payout ratio < 60% (or <85% for utilities): Yes, 50.1%
Comments: Morningstar.com lists the Forward P/E at 10.9 and current Price/Cash Flow at 9.7. As noted in the company's recent quarterly results for Q3 2017 found here, the company continues to make progress towards the strategic imperatives, albeit at a much slower pace than was originally anticipated based on expectations management set for investors several years ago that have since been revised.
Company Profile
International Business Machines Corporation provides information technology (IT) products and services worldwide. Its Cognitive Solutions segment includes Watson, a cognitive computing platform that interacts in natural language, processes big data, and learns from interactions with people and computers. The company's Cognitive Solutions segment also offers data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry; and transaction processing software that runs mission-critical systems in banking, airlines, and retail industries. The company's Global Business Services segment offers business consulting services; delivers system integration, application management, maintenance, and support services for packaged software applications; and business process outsourcing services. Its Technology Services & Cloud Platforms segment provides cloud, project-based, outsourcing, and other managed services for enterprise IT infrastructure environments. This segment also offers technical support, and software and solution support; and integration software solutions. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system for z systems. Its Global Financing segment provides lease, installment payment plans, and loan financing services; short-term inventory and accounts receivable financing to suppliers, distributors, and remarketers; and remanufacturing and remarketing services. It has a strategic collaboration with ABB Ltd to develop industrial artificial intelligence solutions. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York.
I agree with your view on IBM. I wrote about IBM not too long ago and hold a decent size position. There revenue decline has flattened and expecting to see revenue growth in the coming earnings report.
ReplyDeleteIf they can show revenue growth in the up-coming ER, then I would expect the stock to go up, otherwise we may be stuck at current levels for a while. Though, I don't mind the 4% yield with decent div growth.
Mr. ATM,
DeleteIBM is one of only of a very few stocks that I am willing to purchase in the near term simply due the undue premium Mr. Market is demanding as of late. I will continue purchasing small chunks of IBM in the mean time and collect a nice dividend while management continues to make progress. If there is not significant price appreciation in the near term, the dividend on IBM will likely be closer to 4.3% or 4.4% by mid year after the next dividend hike.
Thanks for the stopping by and commenting.
Happy New Year!