IBM has undergone a transformation over the last five years. The impact of the changes can be seen in the earnings history of IBM and has held back earnings growth over the last five years. Earnings are roughly the same as they were 5 years’ ago, but the share price is down 30%. In the same tie period the dividend has grown about 41%. IBM is now much better value than it was in 2013 when the share price peaked at over $200.
Another positive for owners of the common stock is that a stock purchase program started in 2015 still has $3.8 billion to go. IBM management has authority to purchase shares up to a value of $3.8 billion in 2018.
There is some risk to purchasers of the common stock of IBM right now. About 30% of the value on the balance sheet is goodwill relating to acquisitions made in the last 5 years. Please go to Investopedia for more information on goodwill. Any impairments to the value of goodwill is going to adversely impact the value of IBM. IBM conducts an annual survey of the assets that are subject to goodwill and makes an assessment of any impairment on the value of those assets. the 2017 review found now impairments and the value of the goodwill can be considered true for investors in the common stock right now.
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