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Comparing IBM’s and Peers’ Capital Return Policies

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Peer comparison

To enhance shareholder wealth and make its stock more attractive, IBM (IBM) has maintained a strong capital return policy over the years. The company rewards investors through regular quarterly dividend payments and stock repurchase programs.

In the last four years, IBM has returned ~$54.6 billion to investors through dividends and stock repurchases, at an average of ~$13.6 billion each year. During the same period, leading IT companies Microsoft (MSFT), Oracle (ORCL), and Accenture (ACN) have returned around $87.4 billion, $41.5 billion, and $15.9 billion, respectively, to shareholders.

Dividend yield comparison

As shown in the graph above, IBM trails Microsoft in terms of capital returned to investors in the last four years. IBM’s current dividend yield is 4.4%, higher than Microsoft’s, Oracle’s, and Accenture’s dividend yields of 1.7%, 1.6%, and 1.7%, respectively.

IBM’s robust free cash flow has encouraged it to continue with its strong capital return policy. However, the company’s higher leverage and inorganic growth strategy may act as a headwind for the company’s future capital returns.

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