IBM’s ‘substantial’ dividend, debt take wind out of Big Blue’s sails as analyst downgrades stock


International Business Machines Corp.’s stock was downgraded Monday after one analyst said that with Big Blue’s transformation efforts and its somewhat stable stock price over the year, there isn’t much more wind in the sails to push the price higher.


shares declined as much as 1.5% to an intraday low of $134.95, as the Dow Jones Industrial Average

— which counts IBM as a component — declined 0.1%, the S&P 500

slipped 0.6% and the tech-heavy Nasdaq

was down about 1%.

In a Monday note, Edward Jones analyst Logan Purk downgraded IBM’s stock to a hold from a buy rating on the belief that the transformation to a more software- and consulting-focused company is already accounted for in the share price.

IBM shares are up about 1% over the past 12 months, while the Dow average is down 3.5%, the S&P 500 is off 8.6% and the Nasdaq has fallen 15.6%. With that run, year-over-year comparisons are going to be tough, and Purk said that right now, the stock is fairly valued in the $135 area.

Read: IBM posts biggest annual sales increase in more than a decade, announces 3,900 layoffs

Purk said that IBM “has largely been successful reorganizing its business to focus on the faster-growing end markets of software and consulting following the spinoff of its infrastructure-management business,” now known as Kyndryl Holdings Inc.
Investors rewarded IBM for its efforts with a stock price that bucked the 2022 trend.

Read: IBM’s layoffs aren’t helping the stock, as analysts still fret about cash flow

While Purk said that management has done an “admirable job transforming the company [by] spinning off low-growth businesses and focusing on the more attractive end markets of software and consulting,” there doesn’t appear to be any more wind in the sails.

“With the success of these moves, we do not see a meaningful catalyst that will propel shares higher,” Purk said. “The company also holds elevated amounts of debt” that, paired with the “substantial” dividend, “limits the company’s financial flexibility.”

IBM commands a 4.9% dividend yield, the fifth-highest on the Dow average, while fellow Dow tech component Intel Corp.

has a 5% yield. The Dow components with higher yields are Verizon Communications Inc.

at 6.3%, Walgreens Boots Alliance Inc.

at 5.3% and 3M Co.

at 5.1%, according to FactSet data.

Read: Morgan Stanley reverses IBM upgrade after 9 months as stock outperforms broader market

IBM reported its largest sales increase in a decade in late January, an increase of 5.5% to $60.53 billion, but Wall Street was much more concerned with free cash flow, which came in well below expectations at $9.3 billion, with a forecast of $10.5 billion for 2023. 

Read: IBM just broke a winning streak that lasted nearly three decades

Of the 30 analysts who cover IBM, 20 have buy-grade ratings, nine have holds and one has a sell rating with an average target price of $150.49, according to FactSet data.


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Jacob Keiter is a husband, a writer, a journalist, a musician, and a business owner. His journey to becoming a writer was one that was paved with challenges, but ultimately led him to find his true calling. Jacob's early years were marked by a strong desire for creative expression. He was always drawn to music, and in his youth, he played in several bands, chasing the elusive promise of fame and success. However, despite his best efforts, Jacob struggled to find the recognition he craved. It wasn't until he hit a low point in his life that Jacob discovered his love for writing. He turned to writing as a form of therapy during a particularly difficult time, and found that it not only helped him to cope with his struggles, but also allowed him to express himself in a way that he had never been able to before. Jacob's writing skills quickly caught the attention of others, and he soon found himself working as a journalist for The Sun out of Hummelstown. From there, he went on to contribute to a variety of publications, including the American Bee Journal and Referee Magazine. Jacob's writing style is reflective of traditional journalism, but he also infuses his work with a unique voice that sets him apart from others in his field. Despite his success as a writer, Jacob also owns another business, JJ Auto & Home, which specializes in cleaning. Jacob's commitment to excellence is evident in all of his endeavors, whether it be in his writing or in his business ventures. Today, Jacob is the author of two books and continues to inspire others through his writing. His journey to becoming a writer serves as a reminder that sometimes our darkest moments can lead us to our greatest achievements.

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