Investors Looking for Tech Dividends Might Want to Give IBM Stock Another Chance

IBM (NYSE: IBM) recently reported its full-year 2020 financial results to a ho-hum investor reception. Big Blue's revenue remains in stubborn decline, dragged down by its legacy operations that become less important every year as cloud computing demand grows. But hiding just below the surface is a very healthy and growing "hybrid cloud" business. IBM is taking steps to refocus its attention here, but it takes time for an old company like this to bring about fundamental change. Patience will be required, but dividend investors might want to give this stock another chance.

As for those lackluster results, IBM reported full-year 2020 revenue of $73.6 billion, down 4% from 2019 when excluding divestitures and foreign currency exchange rates. Free cash flow was down 9% year over year to $10.8 billion.

The good news here is that IBM is still a highly profitable company, and the free cash flow it generated in the last year was more than enough to cover its dividend payment (which cost it a total of $5.8 billion in 2020 and is currently good for an annual yield of 5.5%) and service its sizable load of debt ($61.5 billion at the end of the year). And as of this writing, IBM stock trades for just 10 times trailing 12-month free cash flow. For me, this old technologist is just too cheap to ignore.

Source Fool.com