International Business Machines Corp. (NYSE:IBM)

CAPS Rating: 4 out of 5

The Company is a globally integrated innovation company, serving the needs of enterprises and institutions worldwide.

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Member Avatar gameguru (33.34) Submitted: 10/21/2014 11:57:05 AM : Outperform Start Price: $163.09 IBM Score: -2.24

Current PE = 11.1, 2.6% dividend yield. That looks like dollar bills thrown in the dumpster to me.

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Member Avatar meridius91 (57.66) Submitted: 10/21/2014 11:36:29 AM : Underperform Start Price: $163.07 IBM Score: +2.25

They have tremendous overhead and no clear line of growth yet. This is going to be a long steady drop.

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Member Avatar bobsweet (20.27) Submitted: 10/20/2014 12:36:23 PM : Outperform Start Price: $168.56 IBM Score: -7.58

At this point why not... $168.00

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Member Avatar bartlettmi (68.89) Submitted: 10/20/2014 10:09:14 AM : Outperform Start Price: $168.36 IBM Score: -7.84

I love buying what Buffett's buying at a discount... enough said.

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Member Avatar panda72 (99.82) Submitted: 10/9/2014 12:01:56 PM : Outperform Start Price: $187.02 IBM Score: -14.46

some companies...you want to hold forever...

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Member Avatar Jordrok (99.17) Submitted: 10/7/2014 11:53:41 AM : Outperform Start Price: $187.37 IBM Score: -14.18

Mechanical investing

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Member Avatar StoxValue (54.47) Submitted: 9/30/2014 3:49:38 PM : Outperform Start Price: $190.14 IBM Score: -14.34

Cash flow-based intrinsic value of the business @ $360/share http://www.stoxvalue.com/ibm-international-business-machines-intrinsic-value/

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Member Avatar My535 (34.41) Submitted: 9/17/2014 2:32:37 PM : Underperform Start Price: $192.99 IBM Score: +13.67

Employee satisfaction steadily declining.

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Member Avatar tommyty (< 20) Submitted: 9/16/2014 12:38:54 PM : Outperform Start Price: $192.81 IBM Score: -13.96

Declining revenue is due to IBM's divestment of their hardware (high revenue, low profit-margin), and investment into the cloud based software (lower revenue, high profit-margin) among others. IBM continue to grow their earnings (isn't that what it's all about?) and has survived the IT bubble and the latest recession much better than most companies. It also doesn't hurt that IBM has become Buffet's 4th largest holding, around 11%, over the past few years. Throw this one in your 401k and reinvest those dividends.

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Member Avatar Kenji94 (42.10) Submitted: 8/14/2014 10:18:20 AM : Outperform Start Price: $187.38 IBM Score: -14.08

Great company at a fair price.

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Member Avatar mscottbone (< 20) Submitted: 8/11/2014 2:39:00 AM : Outperform Start Price: $187.81 IBM Score: -14.95

Too cheap right now.

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Member Avatar notyouagain (60.45) Submitted: 7/24/2014 7:37:26 PM : Outperform Start Price: $192.96 IBM Score: -14.95

Not being a tech geek, I'm forced to make certain assumptions sometimes. These assumptions are based on numbers, and the overwhelming majority of the time, they don't let me down.

I don't have to be a tech geek to understand that when a company increases its quarterly dividend from $0.20 in 2005 to $1.10 nine years later and still has a payout ratio of only 26%, it's another one of those moneymaking dividend machines I like to watch out for.

When they're evaluated correctly, they'll never let you down, either.

IBM, at $195.24, has a PE of 13.35. I know that's not the same as CAPS 'Ratios' page, but I like to get my figures from Yahoo! Finance which also lists a Forward PE of 9.85. I like to check out the spread between the two. Obviously analysts expect IBM to continue having a good year.

Moving on, Yahoo! Finance also lists a PEG of 1.23. It's hard to find many companies as mature as IBM with a PEG value that low. Wow.

I assume it takes a company with a sustainable competitive advantage to maintain the explosive growth in earnings required to keep that dividend payout at a low, low 26% after having increased the dividend by 550% since 2005. Either that or they have a magic money tree somewhere.

IBM's debt/equity of 2.65 and their total debt of $46.47B, while their total cash is $9.72B poses no problem since IBM's interest coverage is 46.8.

IBM, then, earns $46.80 for every dollar they have to pay in interest expense. I think I could live with that.

My figure for gross margin is 49.35 for the trailing twelve months. Gross profit during that time was $48.5B and revenue was $98.27B.

Being able to turn every $100 in revenue into $49.35 in profit is another indicator of a competitive advantage at work.

Their return on equity is 94.62% for the trailing twelve months, due to the wise use of debt; after all, why not use debt financing to increase their return on equity? They can so easily afford it. With no financial leverage, their return on equity would only be equal to their return on assets (which is only 12.9%).

(Return on equity = asset turnover X net margin X financial leverage)

(Asset turnover X net margin = return on assets)

This company obviously has no problem paying its bills, but I'll give you the current ratio anyway. It's 1.14.

IBM latest dividend increase from $3.80 to $4.40 was a boost of almost 16%. They've boosted that dividend ever year for 19 years now, and the Fool lists their 5-year dividend growth rate as 13.33%.

Dividend growth since 2005:

2005..........$0.80
2006..........$1.20
2007..........$1.60
2008..........$2.00
2009..........$2.20
2010..........$2.60
2011..........$3.00
2012..........$3.40
2013..........$3.80
2014..........$4.40

And their payout ratio is still only 26%.

And they're teaming up with another titan now... Apple.

Quite some duo, there. Wow, huh?

IBM has a 3-year beta of .68, so it won't go up as fast as the rest of the market, but it won't fall as fast, either.

This is a stock to buy and keep. 'Locking in gains' in a year or two by selling some is silly if its financials are still as solid as they are now.

Keep it and let that dividend grow. Don't be stupid. Sure, there may be times it'll underperform the market if you're only considering the price. There may even be years it does so.

Just remember, with a dividend grower like this one, YOUR price never stops falling if you reinvest dividends, and your personal dividend yield never stops going up.

100 shares would have cost $8,707 at the closing price on July 30, 2004.

With dividends reinvested, today those 100 shares would have grown to over 117 shares.

At today's price, those 117 shares would be worth over $22,710 and pay annual dividends of more than $514.

$514 / $8,707 = 5.9% yield on cost and in another few years it'll probably be upwards of 10%.

Those shares only cost you around $74.40 (actually a bit less, I'm being lazy).

$8,707 / 117 = $74.40.

Look up the 'Adjusted Close' for different dates at Yahoo! Finance. Click on 'Historical Prices' to find it. Those 'Adjusted Close' figures are assuming you bought shares on that date and held them until today, reinvesting dividends.

You can take today's dividend and divide it by the 'Adjusted Close' for past dates to find what the yield on cost today would have been for someone who bought them then and reinvested dividends till now.

This dividend is double what it was in 2009.

It shows no signs of weakness; no signs of slowing down.

Wow. I wish my best years were possibly still ahead of me when I'm as old as IBM.

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Member Avatar CheeseNMac (38.46) Submitted: 7/19/2014 4:15:41 PM : Outperform Start Price: $190.17 IBM Score: -14.42

Fundamentals

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Member Avatar dtgusa (63.13) Submitted: 7/16/2014 1:30:30 PM : Underperform Start Price: $191.92 IBM Score: +14.76

1) Despite their recent venture with AAPL this wide moat staple continues to under perform based upon a comparison to the S&P 500 19.5% v. IBM's 3.25% YTD increase per MorningStar's calculations of these values.
2) It is a rather mature transnational firm rendering comparisons to indices somewhat moot.
3) None-the-less, macroeconomic factors will continue to proved short-term (next year or so) headwinds.

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Member Avatar NuclearSolutions (27.93) Submitted: 6/8/2014 8:03:12 AM : Outperform Start Price: $185.12 IBM Score: -12.98

Big Blue to Big to fail.

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Member Avatar HayZeus (41.00) Submitted: 6/8/2014 7:42:28 AM : Outperform Start Price: $185.12 IBM Score: -12.98

Big Blue will take us to the next dimension.

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Member Avatar Kimer62 (31.42) Submitted: 6/1/2014 5:47:08 PM : Outperform Start Price: $183.21 IBM Score: -13.58

Plenty of room left in emerging markets for growth! It will be back!

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Member Avatar alphadogg (58.97) Submitted: 5/22/2014 8:31:50 AM : Outperform Start Price: $185.35 IBM Score: -16.37

beaten down

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Member Avatar afewgoodstocks14 (21.51) Submitted: 5/13/2014 3:38:58 PM : Outperform Start Price: $174.75 IBM Score: -16.26

Div. (Yield) $4.40 (2.3%)
Current Yield . . . . . . 2.5%

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Member Avatar as10675 (88.61) Submitted: 5/5/2014 7:23:48 PM : Outperform Start Price: $188.71 IBM Score: -18.57

IBM Dividend yield 2.3%, PE 11.7, normal PE 16.8. Estimated earnings growth rate 10.5% per year. Dividend growth rate 12%. This stock beat the S&P 500 for the last 15 years.

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