When Warren Buffett interviewed at CNBC last week, he mentioned that one of the reasons why he purchased such a large block of IBM shares- $10 billion dollars worth!-was because he was impressed by their relentless dividend growth and share buyback program. Because I hadn't been terribly familiar with IBM's history of share repurchases, I thought it was worth taking a look at how effective IBM has been at reducing its share count over the medium-to-long term.
In 1995, IBM had 2.1 billion shares outstanding. At the present time, IBM has slightly under 1.2 billion shares outstanding. In effect, IBM has been able to cut its share count in half over the past sixteen years, and this means that each share of IBM represents twice the earnings power per share than it would have otherwise since 1995.
Eoin Treacy's view A
number of mega cap technology shares have been notable for their absolute and
relative performance, particularly during a period where the wider market has
been mired in uncertainty. Leaders lead for a reason. Cloud computing reflects
an important story because companies are discovering ways to increase efficiency,
reduce costs and improve the customer experience. These developments are changing
business practice for the better and companies offering such services are benefitting.
IBM also exhibits attractive characteristics from the perspective of yield hungry investors. The share has a solid record of boosting earnings per share and increasing its dividend. IBM currently yields 1.63%.
The share price has been trending relatively consistently since late 2008 and was among the first to surpass its pre-crisis peak. Its defining characteristic is that it has found support in the region of the 200-day MA on successive occasions. The August pullback was the largest since 2008 and marked an inconsistency. It currently appears to be in the process of another reversion towards that trend mean but a sustained move below it would be required to suggest supply dominance beyond the short term.