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We’ve talked a lot about the hit technology companies likeApple(NASDAQ:AAPL) andMicrosoft(NASDAQ:MSFT) have taken in 2022. Not much is said about another PC era giant,International Business Machines(NYSE:IBM). IBM may not have the same cachet these days as Apple and Microsoft, but it’s still a multinational tech company, and has a history dating back to 1911 that makes the other two look like relative newcomers in comparison. IBM stock has felt the effects of 2022 as well, slipping 9% so far this year.
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The market pullback that’s dropped the value of AAPL and MSFT in 2022 has been regarded as a buying opportunity. Look at Apple’s performance since the iPhone was released, look at what the company is doing these days, then look at the drop in the price of Apple shares. Many investors are taking advantage of the situation to add AAPL stock to their portfolio while the dip lasts. What about IBM stock? Does its 2022 performance offer a similar buying opportunity?
Well, it’s a bit of a yes and no situation.
Any company that’s been around since 1911 has had to reinvent itself. A technology company that been around for over a century?
To survive, IBM has gone through multiple big changes. It started as a company that designed and sold business machines, such as punch clocks and then cash registers. Many people today remember IBM as the company that popularized the personal computer in the 1980s. However, IBM sold off its desktop, laptop, and server PC businesses years ago.
It reinvented itself as a company that would focus on sectors like cloud computing, cybersecurity, analytics, IT support, and artificial intelligence (AI).
That transformation was a painful one. In 2017, after the company reported its 21st straight quarter with declining revenue, NYU Stern School of Business professor Aswath Damodaran had a warning:
Not all companies last forever. There is a life cycle to a company. They are born grow and then decline. They [IBM] have been in decline for 10 or 12 years…Trying to turn them around might be the most dangerous thing you can do.
At that point, IBM stock had lost nearly a third of its value over the previous four years. It’s continued to struggle, which is a key reason why it’s not talked about the same way as other PC era giants like Apple and Microsoft. Their stock continued explosive growth until the pullback, while IBM struggled to tread water. Buying APPL now has a reasonable expectation of gains through recovery and then ongoing growth. IBM? That’s more of a question mark.
However, there have been recent signs that the company is making progress. In its latest quarter (reported at the end of January), IBM revenue climbed 6% year-over-year. That is its fastest quarterly revenue growth since Q3 2011. The company beat analyst expectations for both earnings and revenue.
IBM stock popped on that performance but has since given the gains back and then some. At this point, IBM shares are still worth 26% less than they were five years ago.
You can’t talk about IBM stock without highlighting the company’s dividend program.
Simply put, IBM pays quarterly dividends like clockwork. The most recent payout — dividend payment number 428 — was for $1.64 per share, payable on March 13.
The company currently has a 5.29% dividend yield, which puts it among elite company.
At the time of publication, IBM stock earned a “B” rating in my Portfolio Grader. There is definitely opportunity for growth there.
However, not everyone is enamored with Big Blue. Checking with the investment analysts polled by MarketBeat, IBM stock currently has a consensus “hold” rating. However, their average $147.90 price target offers 18.7% upside.
IBM’s generous dividend program might just seal the deal if you’re on the fence. Even if IBM’s latest turnaround effort stalls. Even if IBM stock continues to disappoint in terms of growth, the company’s long history of paying dividends — and a 5.29% annual dividend yield — make an investment in this tech industry giant worth considering.
On the date of publication, Louis Navellier had long positions in MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.