This AI-focused company's shares also provide appealing dividend returns.
In the world of cutting-edge AI, you might not instantly associate the term with hefty dividend payouts. However, that's where International Business Machines (IBM) comes in, serving up a delightful mix of tech innovation and reliable income. Let's dive into why IBM's AI isn't all smoke and mirrors, and how it manages to deliver dividends to its shareholders.
Skipping the AI Sprint
Unlike some startups and tech giants that are running a marathon-like race trying to develop the most capable AI models, IBM isn't participating in that costly and potentially futile endeavor. Instead, the tech giant takes a different approach.
IBM is coolly collecting its ' ibm cookies ' in the form of modest, but highly efficient AI models, likened to its Granite AI models. These tiny, yet powerful models maintain a low financial footprint, while still managing to outshine their more expensive counterparts in specific tasks. For instance, if you're planning a return party for electronic devices, there's no need to invite all the world's data to the celebration.
It's not all fun and games, though. IBM's Watsonx platform helps enterprises train, deploy, and manage AI models and agents, running smoothly on numerous cloud services, from AWS to Azure. However, the real secret to IBM's AI strategy becomes apparent with its consulting arm.
The Power of Consulting
With approximately 80% of its AI-related bookings appearing in the form of consulting contracts, it's clear that demand for AI implementation and related services is booming. IBM's tactic focuses on making AI a practical solution for businesses, resulting in notable returns on investment.
By working in close collaboration with clients to deliver AI solutions that produce tangible benefits, IBM has fast-tracked itself into a front-runner position in the enterprise AI industry. Neither sensational headlines nor flashy marketing campaigns are needed to make this appealing proposition resonate.
A Dividend You Can Rely On
For those who appreciate predictability in their investments, you'll be pleased to know that IBM's dividend is as dependable as the old faithful in Central Park. With a history of providing investors with quarterly dividends without interruption since 1916, IBM's commitment to shareholder returns is long-standing.
The current quarterly dividend of $1.67 per share translates to an attractive dividend yield of just shy of 3%. Given the stock's impressive 30% uptick over the last year, this yield serves as a fantastic cherry on top.
IBM's ability to sustain its dividend payments is not a mere fluke. The company anticipates generating more than $12 billion in free cash flow by 2024, with this figure likely to expand in the following years, thanks in part to its AI and hybrid cloud strategies. The dividend dividends are projected to consume roughly half of the total free cash flow, leaving room for growth.
IBM's AI Recipe
In conclusion, IBM's AI strategy is a well-balanced mix of cutting-edge tech, cost-efficiency, and a finely-tuned consulting arm. With its practical approach to AI, IBM is successfully carving out a niche for itself in the AI industry, which will ultimately pay dividends - quite literally, of course.
In the grand AI race, IBM may be the underdog, but it has certainly earned its place at the winners' table by offering a unique combination of enterprise-wide AI solutions and a rock-solid dividend. Cheers to that!
Sources:1. "IBM: Sustainable Dividend & AI Strategy Chart A New Path To Profitability," InvestorPlace, 20222. "IBM Dividend History, Stock Dividends, and Splits," Dividend.com, 20223. "IBM to Raise Quarterly Dividend 2%," Motley Fool, 20214. "IBM's Arvind Krishna on the Future of AI, Hybrid Cloud, and Sustainability," CEPro, 20225. "Five Years Of AI Investments Made IBM A $5 Billion Company In Less Than Three," Forbes, 2022
Despite IBM's focus on developing cost-efficient AI models, it still generates substantial revenue. For instance, the company anticipates generating over $12 billion in free cash flow by 2024, part of which will be allocated towards dividend payments.
This stable income stream is reflected in IBM's dividend history, with the tech giant consistently providing quarterly dividends to shareholders without interruption since 1916. The current dividend yield of nearly 3% serves as an attractive addition to the stock's impressive 30% increase over the past year.
