Dead-Weight Dividend Stocks: IBM (IBM)
Why It’s Dead Weight: Eroding profitability
Last month, International Business Machines Corp. (NYSE:IBM) logged its eighteenth straight quarter of year-over-year declining revenue. The earnings trend hasn’t fared much more impressively.
Yet, last quarter’s numbers offered a glimmer of hope in that the deterioration of revenue seems to have stabilized, and a number of massive initiatives has led to talk of a turnaround that doesn’t seem illegitimate. Between that and the 3.3% yield it currently sports despite a 28% rally since early January of 2016, ol’ “Big Blue” might just look like one of the market’s top blue-chip dividend stocks again.
Don’t confuse “better” with “good,” however, and don’t confuse one or two improved quarters with a trend. As Credit Suisse analyst Kulbinder Garcha explained last month, “[O]ur closer examination highlights that a series of non operational, non recurring items are supporting the EPS. We believe the structural profitability may continue to erode.”