Saturday, May 2, 2009

Look at this IBM boosts Dividends

You have heard me talk about dividends becoming more important, here is another data point with IBM boosting Dividends.

IBM Boosts Dividend 10%, Adds to Stock Buyback

MIAMI BEACH, Fla. -- International Business Machines Corp. boosted its quarterly dividend 10% and added $3 billion to its stock-buyback program, calling the moves a testament to the strength of its business model.

At the annual meeting of shareholders, Chief Executive Samuel Palmisano said the actions show that IBM, which recently lost a bid to expand by acquiring Sun Microsystems Corp., "entered this turbulent period strong, and we expect to exit it stronger."

[ibm dividend]

In response to a shareholder question, Mr. Palmisano declined to comment on IBM's interest in Sun. However, he said IBM has seen Sun and Oracle Corp., which outbid IBM, working closely together for many years to sell hardware and software combinations.

"They are now formally aligned -- it's not a big change," he said, adding that Oracle will now have to invest heavily in semiconductor development if it wants to maintain Sun's high-end product line.

Mr. Palmisano also predicted that Oracle's relationship with Hewlett-Packard Co. will become more difficult as it tries to sell Sun computers in competition with H-P.

Jesse Greene, vice president for financial management, said in an interview that IBM still has ample capability to make a large acquisition if an opportunity arises. IBM had $12 billion in cash at the end of the quarter, and Mr. Greene said the company generates more free cash flow in the second half of the year than it does in the first half.

[ibm dividend] Bloomberg News

Sam Palmisano, CEO of IBM.

The new quarterly dividend of 55 cents a share, payable June 10 to shareholders of record May 8, will bring IBM's annual dividend outlay to about $3.08 billion, an increase of $280 million. The 10% boost represents a smaller increase than the 25% added last year. IBM said that it has $3.7 billion already authorized in stock buybacks.

Mr. Palmisano said IBM continues to spend heavily on research and development and is building a new business around "analytics and optimization" -- the field of improving customers' operations based on measurements of various processes, including electric-power transmission and securities trading.

He said IBM expects to hire up to 4,000 mathematicians and other specialists over the next three years to boost capabilities in the field. He said that it will open financial-analytics centers in New York, London and Tokyo this year.

Write to William M. Bulkeley at