IBM’s spinoff only boosts its appeal

Article Excerpt

Many tech stocks reinvest their cash flow back into their businesses for growth, rather than paying out dividends. But with its massive cash flow of over $20 billion a year, IBM has lots of room for both: it spends more than $6 billion (8% of sales) on research each year, plus it offers investors a high—and sustainable—5.8% yield. Now, the company will add even more value for shareholders with a spinoff bonus. IBM, $111.90, is a buy. The stock (New York symbol IBM; Shares outstanding: 891.1 million; Market cap: $101.7 billion; TSINetwork Rating: Above Average; Dividend yield: 5.8%) is one of the world’s largest computer companies, with operations in over 175 countries. IBM reports that its revenue for the three months ended September 30, 2020, fell 2.6%, to $17.56 billion from $18.03 billion a year earlier. Weaker demand for the company’s legacy operations, partly due to COVID-19 disruptions, offset strong growth from its cloud operations (up 19%). Cloud computing lets users store…