With the payout increase it announced on Tuesday, IBM has brought its dividend-hiking streak to 30 consecutive years.
At the current share price, its forward yield is about 2.8%.
IBM isn’t immune from macroeconomic turmoil, but it looks like a relatively safe dividend stock.
International Business Machines (NYSE: IBM) announced a $0.01 per share dividend hike on Tuesday, extending its streak of annual payout increases to 30 years. The quarterly dividend that will be paid on June 10 to shareholders of record as of May 9 will be $1.68 per share. At the current share price, IBM stock now has a forward yield of about 2.8%
IBM has paid quarterly dividends uninterrupted since 1916, and it has raised them through the bursting of the dot-com bubble, the financial crisis, the pandemic, and now the outset of President Donald Trump’s global trade war. While its latest increase was small, it made IBM a bit more attractive for income investors.
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IBM isn’t immune from a potential economic slowdown caused by Trump’s unpredictable tariffs. The company’s first-quarter report was generally positive, but its consulting segment did experience some headwinds. Customers continued to spend cautiously on discretionary projects, and the DOGE team’s spending cuts led to some contract cancellations.
The growth of IBM’s generative AI business, which is mostly consulting plus some software, slowed in the first quarter. The company added $1 billion worth of new generative AI business, about half of what it added in the fourth quarter. Seasonality could be a factor, although clients may be pulling back on new projects due to the rising levels of macroeconomic uncertainty.
Despite these headwinds, IBM maintained its full-year guidance for revenue growth of at least 5% after adjusting for foreign exchange rate shifts, and free cash flow of around $13.5 billion. If the U.S. is pushed into a recession this year, that could cause IBM to miss those targets, but as it stands today, the company still expects to hit them.
Given that IBM has grown its dividend consistently for three decades through multiple crises, it is unlikely that management would resort to a dividend cut. Based on the new payment and the company’s outstanding share count as of the end of the first quarter, IBM will distribute roughly 47% of its expected 2025 free cash flow through dividends over the next year. That gives IBM plenty of breathing room to maintain the payout, even if economic conditions take a turn for the worse.
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