Updated on March 6th, 2025 by Felix Martinez
We review each of the Dividend Aristocrats, the group of companies in the S&P 500 Index with 25+ consecutive years of dividend increases, every year.
To become a Dividend Aristocrat, a company must possess durable competitive advantages and a steady business model that generates yearly profits, even during recessions.
But it must also have a shareholder-friendly management team dedicated to maintaining consistent dividend increases each year.
We have compiled a list of all 69 Dividend Aristocrats and important financial metrics such as price-to-earnings ratios and dividend yields. You can download the full list by clicking on the link below:
Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.
Next up in the Dividend Aristocrats In Focus series is International Business Machines (IBM). IBM has increased its dividends 30 years in a row.
In the past few years, IBM has turned itself around by investing in new areas such as artificial intelligence, data, and cloud services, which have returned the company to growth.
In turn, IBM shares have rallied 60% in the past 12 months, far outpacing the S&P 500 Index performance. This article will discuss IBM’s current business model, future growth prospects, and whether we see the stock as a buy right now.
Business Overview
IBM focuses on running mission-critical systems for large, multi-national customers and governments. It typically provides end-to-end solutions. IBM spun off Kyndryl, its managed infrastructure business, in 2021 but is still one of the largest IT services companies in the world.
IBM now has four business segments: Software, Consulting, Infrastructure, and Financing. In 2024, its annual revenue was $62B.
IBM reported fourth-quarter and full-year results on January 29th, 2025. IBM’s fourth-quarter 2024 results showed strong software growth, led by Red Hat, with generative AI contracts reaching $5 billion. CEO Arvind Krishna emphasized the company’s progress in innovation and profitability, projecting 5% revenue growth and $13.5 billion in free cash flow for 2025.
Quarterly revenue reached $17.6 billion, with software up 10%, while consulting and infrastructure declined. Full-year revenue totaled $62.8 billion, with software up 8%. Free cash flow exceeded expectations at $12.7 billion.
IBM ended the year with $14.8 billion in cash and $55 billion in debt. CFO James Kavanaugh highlighted strong profitability and cash flow, enabling continued investment and shareholder returns.
Source: Investor Presentation
Growth Prospects
IBM engineered a successful turnaround in the past few years, and there are signs emerging that IBM’s turnaround is gaining traction.
Its priority is to become a leader in artificial intelligence and hybrid cloud solutions. It has invested aggressively in these areas, such as the $34 billion acquisition of Red Hat in 2019.
IBM sees the hybrid cloud as a $1 trillion market and its most significant opportunity to return to growth in the future.
In 2023, IBM continued its habit of frequently tuck-in acquisitions. It acquired software company Apptio for $4.6 billion, expanding its AI offerings. The company followed that up with the acquisitions of StreamSets and webMethods. Under the present CEO, IBM has acquired 30+ companies.
IBM forecasts revenue growth in the mid-single-digits and free cash flow of about $12 billion in 2024. We expect 4% annual EPS growth for IBM over the next five years.
Source: Investor Presentation
Competitive Advantages & Recession Performance
IBM enjoys meaningful competitive advantages, primarily its industry leadership position and scale. Its competitive strength is its brand, entrenched customer relations, and extensive patent portfolio. IBM is also the market leader in mainframe computers, with 90% of the market and little competition.
IBM receives mixed reviews in terms of recession performance. As a global technology company, it is exposed to the fluctuations of the broader economy.
For example, in 2020, the company’s revenue and earnings-per-share declined as the global economy fell into recession due to the coronavirus pandemic.
That said, IBM performed relatively well in the Great Recession of 2008-2009. IBM’s performance during that recession is listed below:
- 2008 earnings-per-share: $8.93
- 2009 earnings-per-share: $10.01 (12% increase)
- 2010 earnings-per-share: $11.52 (15% increase)
- 2011 earnings-per-share: $13.06 (13% increase)
It is impressive that IBM grew its earnings-per-share each year during the Great Recession. Moreover, the dividend kept increasing.
While the company’s recession performance was less strong in 2020, it remained highly profitable, which allowed it to keep its dividend increase streak alive.
Valuation & Expected Returns
Based on our 2025 estimate of $10.79 in earnings per share and the current stock price of $251, IBM shares trade at a price-to-earnings ratio of 23.3.
The stock trades above our fair value P/E estimate of 15.0. A declining valuation multiple could reduce annual returns by 8.4% per year over the next five years, so the stock seems to be significantly overvalued right now.
These negative returns could be offset by earnings-per-share growth and dividends. As previously mentioned, we expect 4% annual EPS growth through 2030.
In addition, the stock has a current dividend yield of 2.6%. Over the next five years, we estimate total returns at -1.8% per year.
The stock price has risen quickly due to better performance and AI optimism, and it is now nearly a decade high. The low rate of return is due to the current overvaluation of the shares.
Final Thoughts
In 2021, IBM was inducted into the prestigious Dividend Aristocrats list. Due to its steady growth and strong free cash flow, IBM has continued to raise its dividend each year.
IBM’s financial performance is improving, and the company is deleveraging. It should be able to continue raising its dividend each year.
Due to its share price rally over the past year, the stock appears to be overvalued. The low expected returns make it a sell, in our view.
If you are interested in finding high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:
- The Dividend Achievers List: a group of stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List: considered to be the best-of-the-best among dividend growth stocks, the Dividend Kings are a group of exceptional dividend stocks with 50+ years of consecutive dividend increases.
- The Blue Chip Stocks List: contains stocks on either the Dividend Achievers, Dividend Aristocrats, or Dividend Kings list.
- The Monthly Dividend Stocks List: contains stocks that pay dividends each month, for 12 payments per year.
- The High Dividend Stocks List: high dividend stocks are suited for investors that need income now (as opposed to growth later) by listing stocks with 5%+ dividend yields.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: