IBM's Dividend Streak Continues, but Growth Fades

IBM has raised its dividend for an impressive 31 years in a row. However, the latest increase is only a penny, from $1.68 to $1.69 per quarter, which translates to just four cents on an annualized rate.

This trend of small increments started in 2015 when the quarterly payout increased by 20 cents, and since then, it has been mostly one-cent bumps every year. Even peers like Cisco Systems, Microsoft, and Oracle have taken similar steps, but IBM's growth is slower than its competitors.

Despite this, IBM's dividend yield remains high at 2.83%, and the company has ample cash coverage with free cash flow of $14.73B in 2025 against a dividend payout of $6.255 billion. However, the real challenge lies in keeping pace with inflation, which is still ahead of the dividend growth.

IBM's CEO Arvind Krishna points to the company's generative AI book of business exceeding $12.5 billion as evidence that it is 'in the early innings of a structural shift for business'. The focus has shifted from dividend growth to reinvesting in AI and other areas, which raises questions about whether investors should rely on IBM's dividend income.