Thursday, October 30, 2014
Recent Buy in IBM
There have been so many articles flying around about IBM and whether it is sinking or swimming. So I read all of those and then started looking at the numbers. They look good to me so I initiated my first position in IBM and picked up a small number of shares.
Even with recent price declines the price is up there. I caught it at $163.79. It has dropped a little bit since then which makes me a little sad. What makes me not sad is the history of the great company.
The dividend contender has been raising dividends at least back to 1995 for a run of 19 years. That has averaged a dividend growth rate of 19.4% over the past 10 years and it is slowing down over time. The current year is only 12.1% which is still double digit growth that easily keeps up with inflation.
They are pretty far down my ranking system coming in at #192. Mostly from the value at the time I put it together with September information. That was back when the price was $189. The big thing that caused the high ranking is its quality. This seems to be mostly the reason why they are going through all this restructuring to reduce debt and generate higher profits. I usually don't invest in a company with a TTM Price/Book ratio of 10.92 and such a high debt to equity ratio of 2.67. I would prefer P/B of 1 and D/E ratio of 1 as well.
However with plenty of room in the payout ratio and upwards of $13 Billion in free cash flow I think they will adjust to the next era of technology and services and keep on paying that lovely dividend.
Full Disclosure: Long on IBM