Published Wed, 11 Jul 2018 17:47:46 -0400 on Seeking Alpha
In my dividend growth retirement portfolio I'm often willing to buy out of favor high-yield stocks if I believe that the long-term future is bright and the market is being overly pessimistic. Even years of poor returns don't necessarily bother me, as long as the fundamentals remain strong and moving in the right direction.
However, when it comes to struggling blue chips like IBM (IBM), things become a bit hazier. For example, this legendary tech giant is now in one of its frequent corporate shifts, which it's had to do multiple times over its 107 year history.
IBM Total Return Price data by YCharts
As a result IBM shares have languished for 5 years, and has actually generated -11% total returns over that time, thus underperforming the market by 100%.
(Source: Simply Safe Dividends)
This has been a result of the company's six straight years of annual sales decline and three years of shrinking profits. Only the company's free cash flow has managed to tread water over the last five years.
However, with its forward yield now trading at its highest level in 24 years, I thought it might be a good idea to take a deep look at IBM. Specifically in regards to its struggling past, its promising but uncertain future potential, and of course its prospects as a deep value, high-yield income growth investment. In other words, let's take a look at six things that will determine whether IBM is a value trap to be avoided, or... Read more