IBM’s Dividend Survived the Old IBM. Can It Survive the New One?
IBM has raised its dividend every year since 2016 without missing a beat, but the company writing those checks today barely resembles the one that started the streak. The question is whether the math still works when acquisitions, quantum bets,…
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IBM (NYSE:IBM | IBM Price Prediction) 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.
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:
“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:
“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.”
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:
“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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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
