Q&A with Jesse Greene, IBM Treasurer

IBM's Dividend announcement

Date: 25 Apr 2006Tuesday

IBM's Dividend Announcement, Q&A with Jesse Greene, IBM Treasurer

Q: Why did the IBM Board increase the dividend ?

The IBM Board has approved dividend increases in each of the last eleven years. This year the Board recognized IBM´s growing cash flow, strong financial condition and elected to increase the return to shareholders in the form of a dividend.

The dividend increase is a sign of our commitment to our long-term business model, which is to generate double-digit earnings per share growth and generate significant cash flow.

Q: This is a more significant increase than in the past. What should we conclude from that ?

It reinforces our commitment to our long-term business model. Our strong cash flow performance supports our business requirements, fuels investments for growth and enables us to return value to shareholders.

Our business model enables us to invest more than $5 billion in research and development and a similar amount in capital expenditures. each year. In 2005 we completed 16 acquisitions at an aggregate cost of an additional $2 billion to expand our offerings in software and services. We have the cash flow to invest to sustain and grow our business while making substantial returns to shareholders in the form of dividends and stock buyback each year.

Q: What is the total dollar amount that IBM will pay out in dividends with this increase?

A 30-cent dividend amounts to approximately $470 million per quarter - or $1.9 billion on an annual basis. The prior dividend of 20-cents per quarter was approximately $1.3 billion annually.

Q: What percentage of earnings does that payout represent?

Based on 2005 net after tax earnings of $7.9 billion, an annual dividend of $1.9 billion would represent 24% payout.

Q: Adjusting for stock splits (but not for inflation), what was IBM´s highest ever dividend payout?

 

Between June 1989 and December 1992, IBM paid a quarterly dividend of $1.21. Adjusting for the last two stock splits (in 1997 and 1999), that represents 30.25 cents per quarter. This makes the June 10th 2006 payment one quarter of a cent smaller than the previous high, on a split-adjusted basis.

 

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