International Business Machine (IBM): A Dependable Stock for Investors

International Business Machines (NYSE:IBM) continues to shift its business model towards a cognitive solution and cloud revenue. Led by the IBM Cloud and Watson, IBM’s potential to apply profound expertise and innovative technology to enormous amounts of data is allowing it to transform industries and shape new markets.

The company recently announced strong results for the third quarter of 2016. IBM’s consolidated revenue decreased slightly by 0.4% Y/Y and 5% Q/Q due to the decline in Global Business Services, Systems and Global Financing revenues.

However, the company has generated strong growth in Cognitive Solutions and Cloud revenues, indicating that the company has been successfully moving its business portfolio towards new markets.

Over the last twelve months, IBM’s strategic imperatives revenue stood around $31.8 billion, representing 40% of the company’s overall revenue. Its strategic imperative revenue increased 16% to $8.0 billion in the third quarter, compared with the same period of last year.

The company’s cloud revenue has also been growing at an impressive rate over the last twelve months. In the latest quarter, IBM’s cloud as-a-service annual run rate was standing around $7.5 billion, a growth of 66% over the same period of last year.

Ginni Rometty, IBM chair, president and chief executive officer said “IBM’s third-quarter performance, led by continued double-digit growth in our strategic imperatives, is a testament to our leadership in cognitive solutions and cloud. Banks are implementing IBM blockchain solutions, hospitals leveraging Watson to fight cancer, and retailers using cognitive apps built on the IBM Cloud to transform the customer experience.”

The company has been investing a majority of its capital on cognitive solutions and cloud services. Since the start of this year, IBM has invested more than $12 billion in growth opportunities, including R&D and acquisitions. However, at the same time, the company continues to return a huge amount of cash to investors through dividends and buybacks.

At present, International Business Machine offers a quarterly dividend of $1.40 per share, yielding above 3.5%.

The company’s dividends look completely safe considering its potential to make a smooth shift in a business model based on the market trends. For the full year, IBM is planning to generate earnings per share of $13.50, when its annual dividends stand around $5.60 per share. Therefore, IBM is a dependable stock for defensive investors.

DISCLAIMER: The author does not hold any positions in any of the above companies.

Alexander is an analyst for who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.