IBM’s Dividend Survived the Old IBM. Can It Survive the New One?
IBM’s Dividend Survived the Old IBM. Can It Survive the New One?
Chris LangeSun, September 27, 2026 at 6:20 PM UTC
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IBM's 31-year dividend streak survives on penny raises, with the quarterly payout up just $0.06 since 2021 as shares fell 22%.
Cisco mirrors IBM's hardware-to-software pivot most closely, while Oracle sacrifices dividend growth to aggressively reinvest in AI and cloud.
IBM's $14.7B free cash flow easily funds its dividend, but $61B in debt and a $10B quantum commitment claim the incremental dollars.
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IBM (NYSE:IBM) has paid a quarterly dividend every year since 1916 and announced its 31st consecutive year of dividend increases in early 2026. The stock tells a less comfortable story. Shares closed at $225.47, down 22.31% year to date. The company funding that streak now looks very little like the one that built it.
IBM Price Target — 24/7 Wall St.Penny Raises Replaced Real Raises
Old IBM raised with conviction. The quarterly payout rose from $0.95 in 2013 to $1.10 in 2014 and $1.30 in 2015. Since 2021, raises have come one cent at a time, from $1.63 to today's $1.69. The annualized forward dividend is $6.76, a yield near 2.96%. The streak survives on technicalities.
Software Now Carries the Payout
Software is nearly 45% of revenue, and about 80% of it repeats. Annual recurring revenue hit $24.6 billion, up 8%. In Q2, Software rose 5.1% to $7.76B, Consulting grew just 0.2%, and IBM Z revenue fell 42% after surging 67% in Q4. CEO Arvind Krishna framed the shift on the earnings call:
IBM Earnings Explorer — 24/7 Wall St.
"Over the last five years, we have transformed our business, improved the durability of our revenue growth, and strengthened our operating model."
Free Cash Flow Still Covers It
IBM generated $14.73B of free cash flow in 2025 while paying $6.255 billion in dividends. Through the first half of 2026, free cash flow reached $4.8 billion against $3.2 billion in dividends. CFO Jim Kavanaugh made cash the focus:
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"Free cash flow, as you all know, has been one of the two key leading indicators of our financial investment thesis and our shareholder value creation model inside IBM."
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Management still guides free cash flow up about $1 billion this year.
Debt and Deals Compete for the Same Dollars
Acquisitions consumed $8.29B in 2025, and total debt rose $6.3B to $61.3B. Confluent closed in Q1 2026. IBM plans to spend more than $10 billion in quantum over the next five years, including a $1 billion cash contribution to Anderon. Cash dropped 39.95% to $7.17B, and Q2 operating EPS of $2.93 missed expectations of $2.97. Kavanaugh described a balancing act:
IBM Analyst Ratings — 24/7 Wall St.
"We drive the durability of that free cash flow engine that, by the way, enables that flywheel to invest for growth."
How Oracle and Cisco Frame the Choice
Oracle (NYSE:ORCL) is a legacy software peer aggressively pivoting to AI/cloud with a smaller dividend footprint, prioritizing reinvestment over payouts. Cisco (NASDAQ:CSCO) is a mature tech dividend payer navigating a hardware-to-software/AI transition, the closest analog to IBM's path. IBM lands in the middle, with a greater dividend commitment than Oracle's model allows, coupled with a more acquisition-driven growth plan than a steady payer typically runs.
Verdict: The Dividend Fits as an Anchor
The dividend fits the new IBM. Repeats software revenue is steadier than mainframe cycles ever were, and free cash flow easily funds the payout. The price of that fit is growth: acquisitions and quantum get the incremental dollars, and shareholders get pennies. Expect the streak to continue with token raises (if you want streaks measured in generations rather than decades, we ranked ten of them by valuation in a free Dividend Kings report). Investors should keep an eye on the Q3 earnings report, where roughly one-third of delayed deals already closed, and on whether free cash flow hits its growth target.
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Source: “AOL Money”
