IBM Boosts Dividend, Announces $3.5 Billion Share Buyback

Strategic Insights -

International Business Machines Corp. aims to lift earnings per share as revenue growth remains anemic, relying on share repurchases to compensate for weaker sales and earnings. The company's dividend will increase by 10 per cent, rising to 22 cents a share, and a $3.5 billion share buyback program will total 3.1 per cent of its shares. This marks the third increase in the dividend in five years, and the company has been buying back its stock since 1995, with total purchases amounting to approximately $20 billion.

Key Takeaways:

  • IBM plans to buy back $3.5 billion worth of its shares, totaling 3.1 per cent of its total shares.
  • The dividend will increase by 10 per cent, rising to 22 cents a share, the third increase in five years.
  • The company has bought back around $20 billion worth of its stock since 1995.
  • IBM's profits fell 13 per cent in the first quarter due to anemic revenue growth and a drop in hardware sales.
  • The company's earnings per share have been lifted by its buyback program, which spreads net income among fewer shares.
  • Analyst Bob Djurdjevic of Annex Research in Phoenix criticized IBM's reliance on buybacks, saying it shows a "lack of creativity in running the business."
  • Since 1993, Chairman Louis Gerstner has presided over a more-than-fivefold increase in IBM's stock price.

Statistics:

  • IBM's share price rose by 37 cents to $115.68.
  • The company's share price is shy of its record close of $118 set last week.
  • IBM's profits fell 13 per cent in the first quarter.
  • The company's dividend will rise to 22 cents a share.
  • The new buyback equals 3.1 per cent of IBM's shares.
  • IBM's stock price has increased more than fivefold since 1993 under Chairman Louis Gerstner.

Sources:

  • Bloomberg News
  • International Business Machines Corp. annual meeting in Chicago
  • Annex Research in Phoenix
  • Compaq Computer Corp.
  • Intel Corp.