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IBM’s Value Proposition in the US Software Space



IBM’s scale in the systems software space

Let’s look at IBM’s (IBM) value proposition in the IT (information technology) consulting space. Let’s start with IBM’s size.
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As of July 11, 2017, and as you can see in the graph above, IBM, with a market cap of more than $144 billion, was the largest software player by market capitalization in the IT consulting space. It was followed by Accenture (ACN) and Cognizant Technology Solutions (CTSH). Infosys and Wipro are other prominent players in this space.

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IBM’s enterprise value multiples

IBM’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was ~9.5x on July 12, 2017. This metric is lower than Cognizant’s multiple of 12.7x and Accenture’s multiple of ~13.4x. Teradata’s multiple stood at ~8.0x.

IBM’s dividend yield

IBM’s forward annual dividend yield was ~3.9% on July 12, 2017. Since 1916, IBM has not missed a quarterly dividend payment. In fact, IBM‘s dividend has doubled since 2010. IBM is focused on dividends because many of its investors and shareholders view dividends as steady income. IBM’s dividend yield and strategy made it one of Cornerstone Macro’s “Dogs of the Dow” this year.

Accenture’s and Wipro’s forward dividend yields were ~2.0% and ~0.43%, respectively. Cognizant doesn’t pay dividends. In the next and final part of our series, we’ll look at analysts’ recommendations for IBM.


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