Yahoo Finance International Business Machines Corporation (NYSE:IBM) Stock Goes Ex-Dividend In Just Three Days
It looks like International Business Machines Corporation (NYSE:IBM) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase International Business Machines' shares before the 9th of August in order to receive the dividend, which the company will pay on the 10th of September.
The company's upcoming dividend is US$1.67 a share, following on from the last 12 months, when the company distributed a total of US$6.68 per share to shareholders. Last year's total dividend payments show that International Business Machines has a trailing yield of 3.5% on the current share price of US$189.12. If you buy this business for its dividend, you should have an idea of whether International Business Machines's dividend is reliable and sustainable. As a result, readers should always check whether International Business Machines has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for International Business Machines
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. International Business Machines paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 50% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that International Business Machines's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. International Business Machines has delivered 5.8% dividend growth per year on average over the past 10 years.
Final Takeaway
Is International Business Machines an attractive dividend stock, or better left on the shelf? International Business Machines has been unable to generate earnings growth, but at least its dividend looks sustainable, with its profit and cashflow payout ratios within reasonable limits. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Although, if you're still interested in International Business Machines and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with International Business Machines and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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