I hope IBM stock does not rise quickly because it is buying back 10 billions of stock each year. I start to see the number of shares reducing and increased in the last quarter - 3 billions instead of 2 billins. It means more profit per share going forward. Warren Buffet explains the effect in this CNBC article:
http://www.cnbc.com/id/100690842. However, I do see the chart is showing its rebounding from the strong support . I sit and collect dividend for now
At there current $12B / year buyback pace they would buyback 68.6 million shares @ $175 versus 60 million if the stock was hanging around $200. While I agree they should be loading up here I do not have that much patience after July next...2nd quarter 2014 earnings.
It may not take that long. It is way under value now and will pass 178 at the end of the day which is a key signal for the technical trader. Fundamentalist does not care as much technical charting as long as value exists.
instead of shelling out over 150 BILLION over the past 15 years , if IBM had plowed that into divs , the share
price would be around 800 now ..... never been a fan of the buybacks ...
IBM (and others) keep touting that they would rather go with buybacks , because there's no problem if they
put them off , stop , or reduce , ... to put in a div or raise it means death if they have to reduce ... the companies
say that they need a long term confidence to raise or start divs ... WELL .. i guess that IBM would not have
had to cut it ... divs put money in your pocket right away ... buybacks don't have that cache ... g
"nstead of shelling out over 150 BILLION over the past 15 years , if IBM had plowed that into divs , the share
price would be around 800 now ..... never been a fan of the buybacks ... "
That just doesn't compute garce.
In order to have paid out that much IBM's annual dividend payout ratio would have to have been more than 80%. In your daydream IBM would have to have become like an IT REIT of some sort.
Furthermore, if IBM had not retired all those shares then instead of a target of $16.90 Operating EPS it would be more like $11 EPS. And in that dream scanerio of your's garce IBM would have run out of capacity to raise the dividend. So to get to your price of $800 then the p/e would have to be 73x.
IBM had to spend cash flow on buybacks or acquisitions.
Today IBM has the capacity to raise the dividend even if revenue is flat.
Dividend has instance gratification and less tax efficient. Either way, the moot is there, I believe the on-going rate for IBM to charge a senior consultant is at around 3500 to 4000 per day at a cost of 1000 per day. The typical service day rate markup is 2.87. This explains why they have a high ROE of 70 - 80%, very profitable and ludicrous, they can reduce headcounts at will. They are monopolize the software that they sell. As companies are reinvesting with the recovery, technology group will be the beneficiary after financial companies. The big push of smart city to China and India will bear fruits as evident in the project backlog. I cannot beat Warren Buffet on BAC, GS, WFC, GE, GM, however, i bought cheaper than the price they pay for IBM at 178 and have faith in their investment. Their payout ratio is very low so chances are they will increase dividend every year as in the last 18 years.