IBM hikes dividend, ramps up buybacks

KNOXVILLE, Tenn. - Looking for another bounce in its stock price, International Business Machines Corp. increased its dividend payout by 33 percent and authorized an aggressive ramp-up of its share-buyback program yesterday.

"Of course, no one is satisfied with where our stock is today," said Samuel J. Palmisano, chairman and chief executive officer, in a speech to about 150 people at IBM's annual shareholder meeting.

"We need to get our stock price up," he said later in response to a shareholder question. "That is quite honestly what we all want to do."

Palmisano expressed confidence in the company's global strategy, its potential in new software and microchip markets, its acquisitions, and its "reshaping" since divesting its personal-computer business nearly two years ago.

"As we stand poised before a profoundly new era of technology, business and society, I strongly believe that there is no other company that is as well positioned for leadership in all the ways that a business can lead," Palmisano said.

It had been exactly one year since IBM's last dividend increase, when the quarterly payout jumped 50 percent - to 30 cents per share from 20. The new quarterly dividend will be 40 cents per share.

IBM's shares gained $3.28, or 3.45 percent, to close at $98.49 yesterday on the New York Stock Exchange. Depending on the company's share count, the dividend payout could cost IBM more than $2 billion.

IBM's board also authorized the company, based in Armonk, N.Y., to spend an additional $15 billion purchasing its own stock. With money left over from a previous authorization, the company has $16.4 billion to spend on stock buybacks.

The plan continues a long-running effort at IBM, which spent $8 billion buying its stock last year and $3.5 billion during the first quarter of this year. By reducing the number of shares on the open market, the strategy has helped IBM meet one of its key financial goals: to increase earnings per share by at least 10 percent a year, even as revenue growth chugs along in the mid-single digits.