I uncover a high-quality dividend growth stock that appears to be undervalued each week for Daily Trade Alert, which is a site that focuses on dividend growth investing, stocks, and unique investment opportunities. I’ve been writing for them for years now, and they’re just great over there. Each week, I publish an excerpt of my work, when it’s fresh off the press. That way, you readers are given the opportunity to check it out. The content is totally free. I hope you enjoy!
Growing one’s wealth and passive income is such a simple and straightforward process, it almost boggles the mind that more people aren’t financially independent.
But I think the dearth of financial education in the USA might have something to do with this.
In fact, I’m a great case study.
Nobody (parents, teachers, etc.) ever sat me down and told me a thing about money, how to budget, investing, compound interest, or anything else that is almost vital toward living a healthy, happy, and sustainable life.
And so I just went about my life ignorant to money.
I worked to earn and earned to spend. I invested nothing. And I bought things I didn’t need with money I didn’t have.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
Nice analysis on IBM Jason. I have been patient holding the stock and will continue to do so. The ample dividend allows me to do so. Tom
Tom,
I also enjoy that big (and growing) dividend. 🙂
Cheers!
Sorry Jason don’t agree. IBM EBITDA is in stable decline for the past 5y from 25mEUR to 17mEUR, so is their sales. NetDebt/EBITDA ~2 more or less ok, but Equity ratio just just ~10%. This company is build on debts, which I don’t like in general. Yes P/E is low, yes yield is nice, but earnings is in a clear decline pats and without income growth and worst in decline is just a matter of time when dividend freeze or cut will be reached. Its a old IT company which I have bid doubts that will be able to adopt to new fast moving startup times and financials approve it. I would go for INTC or CSCO instead 🙂
P2035,
I note how the balance sheet confuses a lot of people at first glance, especially if you’re not familiar with financial statements. That’s due to how IBM structures its sales, especially the older, larger, hardware sales. The balance sheet has admittedly deteriorated in recent years, but that’s more a function of the company’s restructuring/shifts than any notable issue with debt.
That all said, many high-quality stocks to choose from. If IBM doesn’t suit you, that’s okay. In all honesty, I’d rather others don’t buy the stock (thus creating demand for its shares), which benefits me from the standpoint of keeping it cheap. 🙂
Cheers!
Jason, im prity sure im familier with financial statments and its a fact that IBM has weak balance, there is no confusion about that 😉 Sure there are worse who has equity zero or negative but in general that is not good. I believe weak balance may endup in weaker growth, whitch is the base for us div investors in L/T. Acyualy IBM balance was bad 5y ago when I first analysed some of bigest usa companies and it hasnt improved. Lets see if IBM will manage to raise dividends after 5 more years. I would bet that no 🙂
P2035,
Couldn’t disagree more with you across the board.
IBM’s interest coverage ratio is borderline excellent. You say it was bad five years ago (back when Buffett was touting it heavily). Their interest coverage ratio was in the 40s or 50s back then, which is superb. Their interest coverage ratio as it sits right now is, last I checked, BETTER than Cisco’s (a company you previously mentioned). Cisco simply has a lot more cash on hand, but it’s not like they’re not indebted relative to earnings in a worse capacity. IBM’s cash on hand is something like 30% of long-term debt – debt which is inflated due to the way the business is structured. IBM’s balance sheet has admittedly deteriorated. But it’s nowhere near “weak”. That characterization is just false. It’s actually better than a lot of vaunted companies’ balance sheets. Their ability to cover their liabilities is, frankly, quite strong.
No offense, but it sounds like you’re grossly unfamiliar with how to read into debt in general and/or IBM specifically. Your comment reminds me of people who talk about USA’s debt level without speaking one iota about GDP/growth and the relativity.
Like I mentioned, though, it doesn’t benefit me in any way to see others buying the stock. I benefit when the price is lower. I only write to help/inspire/motivate others and provide worthwhile ideas. If IBM doesn’t suit someone, that’s just fine by me. But I hate to see incorrect information being passed on like this.
And we’ll see about that dividend in five years. There’s nothing, financially speaking, that would indicate they’ll be in any way unable to continue growing it. Outside of a complete collapse in the business model, the dividend should be quite able to continue growing (albeit perhaps more modestly than before).
Cheers!
Hi Jason,
Thanks for the good work you have done on all these articles.
I have no doubts about its current financials and the strength of its balance sheet.
However, qualitatively, is its “Strategic Imperatives” business in cloud, AI and security as recurring, sticky as its traditional mainframe business? Does it have the lock-in effect of the former that makes it so attractive?
Any insights on this area?
Alfred
Alfred,
Thanks for dropping by.
Technology is always and rapidly changing. That’s why it’s important to invest in companies that have been able to endure and adapt. The level of stickiness within a tech company’s products/services is always evolving. The traditional mainframe business was sticky… until it wasn’t.
This is why I diversify across many of the major players in tech, and I try not to make any one tech company a major position.
Cheers!
Could you elaborate why mainframes are not as sticky now? Since an investments into mainframes still will run for many years.
Alfred,
Their financial statements elaborate for me. You can go into the financials and see where legacy businesses are today versus five or ten years ago, which is why IBM is so heavily investing into their strategic imperatives.
Cheers!