IBM Boosts Dividend 13%; Adds $7 Billion To Buyback Program
04/24/2012| 11:47am US/Eastern
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--IBM boosts quarterly dividend by 13% to 85 cents a share
--Big Blue also increases stock-buyback program by $7 billion
--IBM plans to return $70 billion to shareholders by 2015
(Adds details, analyst comments, in the second and fourth through 11th paragraphs.)
By Shara Tibken
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International Business Machines Corp.'s (>> International Business Machines Corp.) board approved a 13% increase in the technology heavyweight's quarterly dividend and authorized an additional $7 billion to buy back shares as the company looks to return more of its rising cash levels to shareholders.
The dividend increase, to 85 cents a share from 75 cents, marks the 17th year in a row that IBM has increased its quarterly payout to shareholders. It will cost the company roughly $117.4 million more per quarter and gives IBM a dividend yield of 1.7%, based on current stock prices.
IBM's board also authorized the addition of $7 billion to its stock-repurchase program, bringing the total amount at its disposal to roughly $12.7 billion. The Armonk, N.Y., company said it expects to request an additional share-repurchase authorization at its October board meeting.
IBM has returned more than $137 billion to shareholders in the form of dividends and share repurchases since 2000, said Chief Executive Ginni Rometty.
"At the same time, we continue to invest in capital expenditures, acquisitions and research and development, to keep IBM at the forefront of innovation," she said.
IBM shares have been trading at all-time highs, boosted by the company's steady earnings growth. Shares were recently ahead 1.7% to $202.04, up 20% over the past 12 months.
IBM has benefited from its push toward higher-margin, complex businesses and away from crowded fields where companies can compete only on price. It has been making heavy investments in areas such as emerging countries and business analytics, and the company has said it plans to return $70 billion of its targeted $100 billion in cash flow to shareholders by 2015.
Many technology companies eschew the notion of a dividend, arguing instead that resources are better spent on innovation. Google Inc. (>> Google Inc), for example, doesn't pay a dividend. But other mature technology companies have initiated dividends, including Oracle Corp. (ORCL), Cisco Systems Inc. (>> Cisco Systems, Inc.), Hewlett-Packard Co. (>> Hewlett-Packard Company) and Intel Corp. (>> Intel Corporation). Last month, Apple Inc. (>> Apple Inc.) disclosed plans for a quarterly dividend and stock buyback.
J.P. Morgan analyst Mark Moskowitz said the expanded dividend and buyback programs at IBM should "augur well for investor sentiment."
"With Apple and other tech companies initiating dividend programs recently, we think that investors had overlooked IBM's long-held efforts," he noted. "With IBM's announcement today, we believe that IBM should come back into favor of capital-focus investors."
While IBM continues to boost its guidance for earnings, worries have emerged that the macroeconomic environment is hurting spending on technology. IBM's revenue has been lighter than expected for the past couple quarters, including the most-recent period. Last week, IBM reported its first-quarter earnings jumped 7.1% as it posted higher revenue from its software and technology-services business, but lower hardware sales.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com
--Mia Lamar contributed to this article.
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