Inside IBM’s Capital Return Program



$1.5 billion remaining in current repurchase program

International Business Machines (IBM) returns value to its shareholders through dividend distributions and stock repurchases. In 3Q17, it had $1.4 billion in dividends and $0.9 billion in repurchases for a combined $2.3 billion.

At the end of 3Q17, $1.5 billion was remaining in the company’s current repurchase authorization. So far in 2017, IBM has returned a combined $7.8 billion to shareholders.

IBM boasts a strong balance sheet

Is there room for IBM to continue its capital return? The company generated free cash flow of $2.5 billion in 3Q17. In that quarter, it returned a total of $2.3 billion to shareholders in dividends and repurchases combined. This could be a sign of prudent capital allocation by IBM’s management.

IBM exited 3Q17 with a strong balance sheet, which management said positions the company well over the long term. The company was holding $11.5 billion in cash at the end of 3Q17, and its balance sheet reflected a total debt of $45.6 billion. Although the debt may seem large, a significant portion of the debt, or $29.3 billion, is tied to IBM’s Global Financing business.

IBM is taking advantage of its healthy balance sheet to invest in more growth so it can possibly generate more free cash flow to return to its shareholders.

How IBM compares with IT peers in cash and debt

Let’s see how IBM’s cash and debt position compares with its IT (information technology) peers. Microsoft (MSFT) had a cash balance of $138.4 billion and total debt of $85.5 billion at the end of fiscal 1Q18, which corresponds to IBM’s 3Q17.

Oracle (ORCL) had a cash balance of $66.9 billion and debt of $52.4 billion, while Hewlett Packard Enterprise (HPE) had a cash balance of $11.1 billion and debt of $16.6 billion. Dell Technologies (DVMT) had a cash balance of $11.2 billion and debt of $49.1 billion at the end of the quarter corresponding to IBM’s 3Q17.

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