October 22, 2018

IBM Fundamental Analysis By The Numbers


All investing is not done with the same objectives or goals in mind. This applies to investing in common stocks just as it does to investing in real estate, commodities, fixed income vehicles, fine art or collectibles – and any other investment that comes to mind. There are times when investors are looking for maximum total return, which is often automatically associated with buying a stock. However, there are also investors looking for high current income, or a growing income stream. Other investors might be more concerned with safety than they are return. Or as Will Rogers so aptly put it: “I am not so much concerned with the return on my capital as I am with the return of my capital.”

I bring this up because my experience suggests that people tend to be myopic when it comes to investing in stocks. For example, there are those that believe that you should only invest in a stock that can beat the so-called market. Similarly, there are those that believe you should only invest in a stock with the objective of generating a high total rate of return. Therefore, if a stock is not meeting those specific objectives, then it is often considered a bad stock.




For example, in 2015 I wrote an article titled “Retirees: I Did Not Buy IBM To Sell; It’s About the Dividend Income, Stupid.” Although I was having a little fun with the title, I was also attempting to point out that I was investing in IBM solely for its growing dividend income stream and safety. When that article was published, IBM was offering a current dividend yield of 3.7%. More to the point, the dividend has increased each year since at an average growth rate of approximately 9 to 10%. Moreover, IBM has also generated substantially more dividend income than I would have gotten had I invested in the S&P 500.  Consequently, IBM has met and even exceeded my expectations and objectives thus far. Therefore, I have been very pleased with my IBM holding.


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