High-Yield Stocks That Could Wreck Your Retirement: IBM (IBM)
Dividend Yield: 3.2%
I have all the respect in the world for Warren Buffett. The man is a living legend. But I’d love to know what on earth he was thinking when he made International Business Machines Corp. (NYSE:IBM) one of the largest holdings in his portfolio.
It appears that the Oracle of Omaha, as astute an investor as he is, failed to take into consideration how the rise of the cloud would wreck IBM’s business. As ridiculous as this would have sounded even five years ago, I question IBM’s long-term viability at this point.
Amazon.com, Inc. (NASDAQ:AMZN) gets a lot of press for its disruption of retail commerce. But Amazon’s cloud computing platform — Amazon Web Services (AWS) — is having an equally disruptive effect on business computing services. Just look at IBM’s awful run: Its revenues have fallen for 19 consecutive quarters. In another week, we’ll find out if IBM can make it an even 20.
Stop and think about that. IBM’s revenues have been shrinking for nearly five years straight, and a lot its business is going to Amazon and cheaper cloud competitors.
Corporate purchasing managers back in the day used to say that “no one ever got fired for buying IBM.” Well, if you’re a portfolio manager, you probably ought to get fired for IBM. Yes, it yields a nice 3.2% … but it’s also highly likely to let you down if you’re depending on it to fund your retirement.