IBM Has Paid Dividends Since 1916. Here’s Why Retirees Should Pay Attention Now
IBM has raised its dividend every year since 1916, but the raises have shrunk to a single penny while debt climbs and a weak quarter rattles investors. Whether the cash machine can satisfy retirees and fund IBM's AI ambitions at…
IBM (NYSE:IBM | IBM Price Prediction) has paid a quarterly dividend every year since 1916, and 2026 brought its 31st consecutive year of dividend increases. For retired people who own the stock for income, the run matters less than the cash behind it. IBM is also paying for AI, acquisitions and quantum computing, and a weak second quarter has added pressure.
Free Cash Flow Still Covers the Payout
IBM generated $14.734 billion of free cash flow in 2025 and paid $6.255 billion in common dividends. That means the payout took about 42% of free cash flow. In the first half of 2026, IBM produced $4.8 billion of free cash flow and paid out $3.2 billion in dividends. Management still expects free cash flow to rise by about $1 billion this year. CFO Jim Kavanaugh described the plan on the July call:
“We believe with the focused portfolio that we have, with a very disciplined capital allocation, the diversity of our business model as you see in our guide, with a relentless focus on productivity, we drive the durability of that free cash flow engine that, by the way, enables that flywheel to invest for growth.”
A Long Streak Kept Alive by One-Cent Raises
The raises have become much smaller. In 2015, IBM lifted the quarterly dividend from $1.10 to $1.30, an increase of about 18%. Every annual raise since 2020 has been exactly one cent, taking the payout from $1.63 to today’s $1.69. The latest increase was about 0.6%. At $233.24 a share, the $6.76 annualized dividend yields about 2.9%. The board is protecting the run and sending most extra cash elsewhere.
Debt and Deals Want the Same Dollars
IBM ended the second quarter with $62 billion of total debt. That figure includes $13 billion linked to its financing business. Cash and equivalents dropped to $7.172 billion, down 39.95% from a year earlier. IBM spent $8.294 billion on acquisitions in 2025, closed the Confluent deal in early 2026 and plans to invest more than $10 billion in quantum over the next five years. Management says most of the net interest drag is now behind it.
What the Business Is Actually Doing
Second-quarter revenue rose 1.1% to $17.162 billion, and operating EPS of $2.93 came in short of the $2.97 estimate, missing expectations. Operating income fell 19.67%. Software grew 5.1%, led by Red Hat at 11%, while IBM Z mainframe revenue dropped 42%. CEO Arvind Krishna said many of the delayed deals were already closing:
“The fact that a third have already closed in the first three weeks gives us an indication, not yet full evidence, but a good indication that this was deferral and not destruction.”
Shares are down 19.65% year to date.
How Cisco and Oracle Compare
Cisco Systems (NASDAQ:CSCO) raised its quarterly dividend by 2% to $0.42. It brought in $14.177 billion of operating cash flow in fiscal 2026 and spent $1.41 billion on capital expenditures. While Oracle (NYSE:ORCL) has held its dividend at $0.50, its latest quarter showed free cash flow of -$5.396 billion after $28.499 billion of capital spending. Oracle expects to raise about $40 billion in debt and equity this fiscal year. IBM falls between the two. It pays its dividend out of its own cash, but its raises are slower than Cisco’s.
Verdict for Income Investors
Ultimately, IBM can keep funding its dividend. Free cash flow covers the payout with room to spare, and debt service and investment still fit inside that cash. The trade-off is growth: the pattern points to more one-cent raises and little real income growth. A one-cent raise is not the warning sign a cut usually sends (we laid out the seven that are in a free dividend trap guide). At the next earnings report, keep an eye on whether free cash flow stays on track for the extra $1 billion and whether the delayed software deals close.
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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.
