IBM Announces More Share Buybacks, Higher Dividends

May 6, 2013 Jenny Thomas

If you’re an IBM shareholder in need of some fast cash, we have some good news for you. IBM announced it has boosted its dividend 12 percent and approved $5 billion in stock buybacks at its annual meeting last week. The dividend of 95 cents a share will be payable on June 10 to shareholders of record on May 10. With the approval of the additional funds, IBM now has $11.2 billion in its repurchase program, which is enough to repurchase about 5.6 percent of its overall share count on Wall Street.

Whether or not this is good news for IBM is debatable. The cash coming back to shareholders coincides with a rare earnings shortfall. As we previously reported, Big Blue’s first quarter profits missed estimates for the first time since 2005, and sales at the hardware division dropped 17 percent last quarter, contributing to the slide. (“i” can think of one platform IBM could be working a little harder to promote.)

Last year, IT Jungle‘s editor in chief, Timothy Prickett Morgan, speculated on the ramifications of IBM’s practice of buying back stock. IBM has retired about a third of its shares since 2000 through buybacks, and at that time, Tim estimated that IBM might drop in half again from the 1.16 billion shares outstanding in the next decade. “At this rate, in two decades or more, IBM won’t have much of a public float left and will have to go public all over again. If IBM’s shares double in value in the next decade and it buys back half of them, it will end up with the same $230 billion or so market capitalization it has today,” he wrote.

IBM will repurchase shares on the open market or in private transactions from time to time, depending on market conditions. IBM expects to request additional share repurchase authorization at the October 2013 board meeting.

This is the 18th consecutive year that IBM has increased its quarterly cash dividend, and the 10th year in a row of double-digit percent increases, according to a IBM’s statement about is share buybacks and dividend bump. IBM has increased its dividend more than 600 percent, and reduced its share count by a third, since the beginning of 2000.

With the payment of the June 10 dividend, IBM will have paid quarterly dividends every year since 1916.

“Since 2000, we have returned over $150 billion to shareholders in the form of dividends and share repurchases,” Ginni Rommetty, IBM chairman, president, and CEO, said that statement last Tuesday. “This enables the company to deliver value to our shareholders.”

Looks like the practice of buying back shares can be interpreted in many ways. One thing that is for certain: Year after year, one way or another, IBM continues to perform for its shareholders since recovering from running aground in the early 1990s.