Trades – International Business Machines (IBM) Purchase


Hope you guys had a wonderful Thanksgiving! As you can tell, I enjoyed mine with some radio silence here on the blog. While not fully intended, our lives have changed a bit with the addition of a puppy to the house. She is certainly an energetic sort and we’ve been working on adjusting our schedules and lifestyle a bit to accommodate taking care of our new family member. But I digress; this is an investing blog, so let’s take a look at my most recent transaction…

As part of my process towards increasing and sharing my passive income, I post my trading activity for my dividend growth portfolios. As such, on November 12th, I purchased 9 shares of International Business Machines (IBM) $161.80 per share, giving me a cost basis of $162.35 per share net of commissions. This was my first purchase of IBM, and the purchase was made in my Roth IRA.

IBM is a well-known, diversified information technology company in the process of reinventing themselves. Historically, they were known for their hardware solutions, but over the last couple of decades have been expanding the service side of their business. Over the past decade, they’ve seen some top-line revenue struggles as they transition their business, but have been able to reward shareholders with strong dividend increases through rising earnings per share due to extensive share repurchases.

Some fellow dividend growth bloggers have put together some great posts on IBM, so feel free to check them out:

Since mid-October, IBM’s stock price has dropped significantly, plummeting from just north of $180 down to the low $160s. This drop was the result of a poor quarterly report indicating continued struggles in growing revenues. However, as a dividend growth investor, my primary concern is dividends, and the ability for the company to continue growing them in the future. Failure to increase revenue has been offset thus far by share repurchases thus far, and there is plenty of room and cash flow to continue to do so. Below is a chart reflecting their stock price over the last five months:

Trades - International Business Machines IBM Purchase - IBM Chart

IBM Trade Details

Generally speaking, I tend to stay away from technology companies. Currently, I only own Cisco in the technology space, and it is a small position. My purchase of IBM is not much bigger, and overall I still have a small allocation to the sector. As part of my push to continue to diversify my portfolio, this adds another great dividend generator to my growing portfolio.

IBM is a Dividend Contender, having raised their dividends for 19 consecutive years. Management has done a tremendous job continuing to increase dividends with flat revenues, and I anticipate this to continue moving forward. With their latest dividend increase raising their annual dividend from $3.80 to $4.40 per share, my purchase of 9 shares carry a yield on cost of 2.71%. Over the last five years, IBM has a dividend growth rate of 14.3%. This purchase adds $39.60 to my forward 12-month dividends, bringing me up to $2,096.75 of total forward 12-month dividends. IBM pays its dividends quarterly in March, June, September, and December.

My Dividend Growth Portfolio and 2014 Dividend Calendar have been updated for this purchase.

What do you think about this purchase? I know some folks in the DG community have picked up shares of IBM after their big tumble in price in October.

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  1. WriteYourOwn,

    Great purchase! I like that you were able to dollar cost average down and add $40 to your forward looking dividend income. Excited for what 2015 has in store for them and what track record they will continue to lay down in the dividend growth department. Also – thanks for the message – appreciate it! Congrats on the purchase.


    • Was my first purchase of IBM, and certainly a pretty solid price and yield to have to enter the position.

      No worries on the mention, great analysis! Thanks for commenting Lanny.

  2. Thanks for sharing your recent purchase in IBM. I know several other DGI bloggers have been flocking to this one after its recent drop. Personally, tech is not in my portfolio and I don’t intend it to ever be. Not that IBM is a bad company it’s just that things can change very rapidly in the space and former greats seem to always fall eventually. There was a time when AOL was THE Internet for many people. That’s all they knew and look where it is today. Even after buying a traditional media business.

    • DivHut, I can appreciate where you stand, but I disagree with categorically disavowing an entire sector as an investor. I put it in the same category as “socially responsible investing” which makes no sense given that all large businesses have a dark corner or two to them. While I don’t intend on building a large technology asset base, having a limited amount of exposure is something I desire as part of my overall portfolio.

      Thanks for sharing your thoughts. I appreciate the DG community in that folks can exchange ideas and different perspectives on investing, even as we all shoot for the same goal.

  3. Thanks for the link to my analysis. I still have yet to figure out if IBM will do well in the long run, and by extension, fit in my personal portfolio. But I certainly can’t deny that IBM appears cheap, especially after that slide. Hope it treats you well!

    • Not a problem DD. I think they will continue to do well as they transition from a products based company to a service company. Those transitions take time, and given the tremendous cash flow and scale, I’m not too concerned long-term.

      Appreciate you stopping by and commenting!

  4. W2R,

    Nice! One of the more compelling (and obvious, in my view) values in the market right now. Happy to be a fellow shareholder. :)

    They’ve been signing contracts left and right lately. Things seem to be moving in the right direction. Meanwhile, they could see stagnant revenue for another decade and we’d be sitting on much larger dividends anyhow. Plus, we are talking about a company with $100 billion/yr in revenue and $13 billion in FCF.

    I always find it interesting that a company develops a “narrative” in the community and it’s automatically accepted. Nobody talks about insurers with stagnant revenue. Or even PG – its revenue has gone nowhere since 2008.

    We’ll see what happens here with IBM, but I’m confident they’ll be paying out substantially more dividends 10 years from now.

    Best regards.

    • Thanks for the comments DM. I agree with most of what you’ve said, and can relate to the confusion over the picking and choosing of what sector or company gets hammered. Personally PG isn’t a company I’m heavily interested in, I’d rather build my UL holdings, however, the point still stands to some degree. A company with strong cash flows and proper management should be able to continue building shareholder value by putting that cash to work. IBM has done this quite well with share buybacks.

      Appreciate your thoughts and for stopping by. Always glad to hear from you!

  5. I’m strongly considering IBM going forward, like you I’m light in the sector only owning AT&T and wouldn’t mind adding one more. I recently made a post about recent blogger purchases and IBM was close to the top of the list. Thanks for linking the 3 analysis as well.

    • While I don’t envision ever having significant exposure to the technology sector, I am happy to add some positions to help diversify my portfolio and income stream. I love the recent blogger activity series and think it provides some valuable insight into what the greater community sees as values in the market.

      Thanks for stopping by and weighing in with your thoughts.

  6. WYOR,
    I bought some IBM a week or two ago. I work in the industry and prefer ACN from a growth and balance sheet perspective. But IBM is an obvious value here compared to the market. They have a tight grip on many contracts that are very long term. I know some mainframe computing systems they’ve been supporting for many decades. They sell both the equipment and services.

    Based on their strong industry position and good yield at this level, I bought a small amount. So I like this move for your portfolio. Plus it’s big blue! As blue chip as it gets.

    • RBD, glad to have you as a fellow shareholder. I think they are indeed and obvious value given the size of their cash flow and their position in the market. While they have some headwinds as they transition into the “new” economy of service instead of just products, I believe they will ultimately be quite successful.

      Haha and yes, as blue as blue can get. Thanks for stopping by!

  7. WYOR,

    You made nearly the exact same purchase I did a few weeks ago. Same number of shares at a price within a couple pennies. Glad to be a fellow shareholder!

    I still feel good about the long term prospects of my purchase after some initial doubt, and feel vindicated with IBM showing up in the news regularly attached to new deals. I even FRIP’ed in another share on a small dip to make it a clean 10 :)


    • Great minds think alike! :) Happy to be a fellow shareholder with you and I agree, the long term prospects are good as they continue to lock up future contracts. A solid opportunity to add to my small technology exposure.

      Thanks for stopping by DWC!

  8. IBM has this price will be a great way to lower cost basis or an even better entry point for a new buyer. IBM has been great at adapting to the changing technology/business environment and I can’t see that changing any time soon. Plus, it can’t hurt to own one of Buffett’s largest holdings! I might have to consider adding some here too. So many good options and not enough cash though is the problem.

    • So many good options? Most investors are saying everything is overvalued! :) I’d love to hear what your current watchlist is!

      I am confident that this will end up being a successful investment over the long-term, and would buy more shares should the value stay depressed. Thanks for stopping by TI!

  9. Nice buy! A little refreshing to see someone purchasing something other than BBL or energy related stocks. Way to take advantage of the price drop.

    • Tawcan,

      I raise my hand to buying BBL and energy stocks last month. It was hard not to considering the purchases I made were below my cost basis and most everything else wasn’t. Had I not already bought IBM recently I would have on any of the recent pullbacks under $162.

      I get the impression most everyone who was willing to add to energy already has and now it’s a waiting game to see what other opportunities might present themselves over the next 30-60 days.

      If the markets stay around where they’re at right now then the only investing I foresee myself doing this month is reinvesting dividends received.


      • I’m in agreement with you DWC. Buy when you find value, and ignore the noise of those around you, regardless of whether they are bloggers, readers, analysts or otherwise. I am still open to expanding my energy holdings and really wouldn’t be concerned about what others think as long as I’m focused on my end goal of developing my dividend income stream.

        Thanks for your additional thoughts DWC.

    • I’m not sure I understand the frustration with so many folks buying energy stocks. When the market offers an opportunity why begrudge those who are taking advantage of that opportunity. With regards to IBM, I’m happy to have added some diversification to my portfolio and adding another solid dividend payer to the group.

      Thanks for stopping by!

  10. I’m not an owner of IBM but can see the value there and the overall appeal. It’s not a stock I’ve had on my radar at this point in the game for me. Best of luck with the purchase!

  11. I never had an entry about it but I am long IBM. Its one of my heaviest positions along with RKT. I think too many people focus on overall revenue vs department revenue. Their smaller future departments are growing. Their older technologies are shrinking. They’ll be fine.

    • I like IBM at these prices, and wouldn’t be opposed to picking up some more shares. I think they will continue to transition to higher margin and service based work and continue to evolve as a company. Thanks for stopping by PMU!

  12. W2R,

    I really like this pick. I have been adding shares myself recently. One of my strategies (unscientific of course) is to grab shares of the worst performing DJIA member. Many times these companies are temporarily out of favor and rebound within the following year or so. It is a bit of a contrarian strategy similar to the dogs of the dow strategy (without using yield as a factor), but surprising creates solid results. By the way I use the dogs of the dow strategy as well, but IBM currently would fit the yield criteria.


    • Thanks MDP, I like it too! That is an interesting strategy for picking, but from a macro level identifies the ‘out of favor’ stock, which, in our cyclical world, should rebound. What a wonderful world of investing we live in, thanks for stopping by!

  13. Great buy! I’m a little jealous of your 2.78% yield on cost, having picked up mine before the drop at 2.34%. Nevertheless, I’m happy to be an IBM investor and I’m looking forward to many years of dividend growth.

    Take care!

    • If only I were a master at market timing? :) I’m happy to have gotten in where I did, and would love to add some more shares when and if it makes sense.

      Thanks for stopping by FerdiS!

  14. Excellent buy. IBM is on my watchlist, hoping for a bigger drop before buying. You can’t go wrong with IBM and Warren Buffett as a big fellow shareholder. Russian stocks and commodity stocks have been hit harder lately, so with limited capital I have been focusing on those instead.

  15. I think IBM is very smart for buddying up with Apple. Their partnership could give them great traction in the enterprise. It looks like the first results of the collaboration are being released:

    • Sounds like a good partnership to me. Both companies bring entirely different skill sets and competencies to the table, so if they can find a good balance, it will pay off in spades.

      Always good to get your thoughts Mr. 1500, so thanks for stopping by!

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