Recently, we shared a list detailing why certain dividend stocks, including International Business Machines Corporation (NYSE:IBM), are seeing declines. Today, we’ll dive into how IBM is faring compared to other dividend stocks in a similar situation.
As dividend season is upon us, announcements are coming in fast!
The stock market has been experiencing some ups and downs, especially after new tariffs were introduced in the US. Since President Trump announced a 25% tariff on goods from Canada and Mexico, and a steep 60% on Chinese products, the market has felt the strain. This resulted in a noticeable dip of 0.76% in the broader market, with the Nasdaq falling even more, by 1.20%.
Despite these market fluctuations, many investors are still drawn to dividend stocks. They are particularly interested in companies known for increasing their payouts regularly—a hallmark of what’s known as Dividend Aristocrats. Analysts have been closely watching their performance over the years.
Phillip Brzenk, in a 2019 piece on dividend growth strategies, highlighted that during six years of market decline since 1989, Dividend Aristocrats outperformed the market by an average of 13.28%. In fact, during three of those tough years, they generated positive total returns. On a monthly basis, they also outperformed the market 53% of the time.
Between 2005 and September 2023, the Dividend Aristocrats Index recorded a total return of 10.35%. This is a bit better than the broader market’s return of 9.54%. Additionally, the volatility for these stocks was lower, showing they are generally more stable during market shifts.
Today, we’ll be focusing on underperforming dividend stocks with a market cap of at least $1 billion. We checked their returns and identified ten stocks that declined on February 6, 2024, ranking them by dividend yield. We also considered hedge fund sentiment from our Q3 2024 database.
Why look at stocks heavily favored by hedge funds? Research suggests that mirroring top hedge fund picks can lead to better market performance. Our newsletter’s strategy has yielded a remarkable 275% return since May 2014.
Now, turning our attention to IBM, which recently dropped from its peak of $265.72. Mirae Asset Global Investments Co. Ltd. has increased its stake to 10.6%, and by the end of Q3 2024, 57 hedge funds had significant holdings in IBM. Despite this interest, the stock has seen a decline, even though analysts like Stiefel maintain a buy rating with a target of $290. This drop might provide a good chance for investors to buy in.
IBM is known for its reliable dividends, boasting a current yield of 2.61% and a quarter payment of $1.67. They also have a high dividend payout ratio of 102.6%, reflecting a commitment to returning value to shareholders.
While IBM ranks 9th among the declining dividend stocks, the potential exists for AI stocks to deliver better returns in a shorter time frame. If you’re interested in exploring promising AI stocks that trade at reasonable earnings multiples, consider checking out our analysis of the cheapest AI stock.
For a broader look at potential investments, you might want to check out our list of the 20 Best AI Stocks to Buy Now and a comprehensive directory of AI companies under $2 billion.
Disclosure: None. This article was originally published by Insider Monkey.
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Source linkDividend Aristocrats, dividend growth stocks, Dividend Stocks, dividend yields, hedge funds, dividend payout ratio, market downturns, International Business, President Donald Trump, dividend growth
